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Receivables Management

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Need help with the following questions, please elaberate.

1. What are the implications of extending Liberal Credit Policies to; Customers, Creditors and the Organization? Discuss.

2. How would rapidly expanding sales produce negative cash flow? Discuss.

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Solution Summary

The answer describes the implications of extending liberal credit & rapidly expanding sales.

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These are the questions involving the issue of credit management. This is decision relating to terms of sale. Here one has to establish sensible credit limits. The job of the credit manager is not to minimize the number of baddebts but to maximize the profit. This means that one should increase the customer's credit limit as long as the probability of payment times the expected profit is greater than the probability of default times the cost of goods.

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