Management and Organizational Studies 2310A/B Chapter Notes - Chapter 20: Material Requirements Planning, Credit Risk, Opportunity Cost

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Stacey Hann

Document Summary

Credit and receivables: when credit is granted an ar is created. Include trade credits - trade to other firms: very important source of financing for corporations, consumer credit - credit granted to consumers, a cash only economy would force companies to lower prices. In a perfect market environment it would make no difference to the seller or buyer whether credit was granted. Information advantages may allow the seller to offer more attractive and flexible credit terms and be more liberal in authorizing credit. Set of written credit policies: cover credit terms, information for credit analysis, collection procedures and monitoring of receivables, helps control possible conflicts between credit department and sales. Float influences the receivables period: one way to reduce the ar period is to seep up cheque mailing, processing and clearing. Investment in receivables: average collection period (acp) = receivables period = days" sales in receivable, ar = av daily sales x acp.