BUSI 530 Chapter 20: Chapter 20
Document Summary
Trade credit: bills awaiting payment from one company to another. Consumer credit: bills awaiting payment from the final consumer to a company. Terms of sale: credit, discount, and payment terms offered on a sale. Implicit loan from the supplier: a firm that buys on credit is in effect borrowing from its supplier. Saves cash today but will have to pay later. Open account: agreement whereby sales are made with no formal debt contract. Sight draft: when immediate payment is required. Banker"s acceptance: bank guarantees the customer"s debt. Five c"s of credit (5: customer"s character, customer"s capacity to pay, customer"s capital, collateral provided by the customer, condition of the customer"s business. Standards set to determine the amount and nature of credit to extend to customers. The decision to offer credit depends on the probability of payment. You should grant credit if the expected profit from doing so is greater than the profit from refusing .
