Page 171 - DMGT409Basic Financial Management

Basic Financial Management

Notes 5. “The credit policy of a firm is criticized because the bad debt losses have increased”. Discuss

under what situations this criticism may not be justifi ed.
6. What is credit evaluation? Discuss the steps involved in it.
7. What do you mean by aging schedule?
8. Hare Ram & Co, produces 1,00,000 units and sells at `80 per unit. 70 per cent of sales are
credit sales. Average receivables amount is `2,00,000. Determine average collection period
(ACP).
9. Dream Well Company’s credit sales for the year 2004 are ` 1,50,000. The company was
started 2004 year with opening balance of receivables `15,000 and 2004 year business is
closed with `11,000 receivables. Calculate receivables turnover and ACP.

10. Name various costs of accounts receivables management.
Answers: Self Assessment

1. Sundry debtors 2. Bills receivables 3. Risk
4. Letter of credit 5. Credit period, Cash discount and Cash discount period
6. Cash discount 7. early payments 8. Aging schedule
9. Collection matrix 10. ACP 11. True

12. True 13. True 14. True
15. True 16. True 17. False

9.11 Further Readings

Books
Chandra, P., Financial Management - Theory and Practice, New Delhi, Tata McGraw
Hill Publishing Company Ltd., 2002, p. 3.
Sudhindra Bhat, Financial Management, New Delhi, Excel Books, 2008.
Van Horne, J.C. and Wachowicz, Jr, J.M., Fundamentals of Financial Management,
New Delhi, Prentice Hall of India Pvt. Ltd., 1996, p. 2.

Online links
http://www.fei.org/
www.scribd.com

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