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Finance - Introduction to Corporate Finance

Introduction to Corporate Finance - (Cash Conversion, Inventory, and Receivables
Management)

4. What aspects must managers consider when deciding on a trade credit policy for the firm?

6. What factors should managers consider when determining the company's collection policy?

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Question 4.
The aspects must managers consider when deciding on a trade credit policy for the firm are:
1. Credit Standards Credit Period and normal terms of sale. This means that you must consider the people to whom you will sell on credit, length of the payment period and the size of any cash discounts. In most industries these conditions are standardized.
2. Form of the contract with your customer. Most domestic sales are made on open account. But if the customer is located in a foreign country, you may require more formal contract may be in place.
3. Each customer's creditworthiness based on a variety of ...

Solution Summary

The solution discusses the aspects a manager must consider when deciding on a trade credit policy for the firm. The factors which managers should consider when determining the company`s collection policy is determined.

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