Management of fin serv quiz

8/12/2019 Management of fin serv quiz

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MANAGING FINANCIAL SERVICES

Quiz



Factoring refers to:

A)Determining the aging schedule of thefirm's accounts receivable

B)The sale of a firm's accounts receivable toanother firm C)The determination of the averagecollection period

D)Scoring a customer based on the 5 C's ofcredit

E)All of the above



When credit is granted to

another firm this gives rise toa(n): A)Accounts receivable and is called a

consumer credit B)Credit due and is called an instalment note C)Accounts receivable and is called tradecredit

D)Trade agreement and is called aninstalment note





Companies frequently use information fromthe following sources when conducting

their credit analysis except :

A)Financial statement supplied by the

customer B)Payment history supplied by other firms C)Payment history supplied by banks

D)All of the above are sources of information



Exporters who require guarantee

of payment will ask for: A)Trade acceptances B)Bankers' acceptances

C)An irrevocable letter of credit D)None of the above



A customer has ordered goods with a value of $800.The production cost is $600. Under what conditionsshould you extend credit if there is no possibilityof repeat orders?

A)If the probability of payment exceeds 0.67 B)If the probability of payment exceeds 0.75 C)If the probability of payment exceeds 0.80 D)If the probability of payment exceeds 0.90 E)Should always extend credit - price exceedsthe cost



Which of the following

statements is true? A)New companies must be prepared to incurmore bad debts than established businesses aspart of the cost of building up a good customers

list B)To ensure fairness, companies should giveeach customer the same type of credit analysis

C)Companies with high profit margins need tobe particularly careful about extending credit tohigh-risk customers

D)All of the above



The average collection period

for a firm that offers adiscount must: A)Be equal to the net period if customers

take the discount or pay on time B)Be greater than the net period if customerstake the discount or pay on time

C)Be less than the net period if customerstake the discount or pay on time

D)Be unchanged because the collectionperiod is unaffected by the discount



If goods are sold on open

account, the customer is askedto sign an IOU. A)True

B)False



Factoring arrangement in which the factorprovides assistance for collection and insurance

against bad debts is called:Advance FactoringRecourse Factoring

ExportFactoringMaturityFactoring





Credit scoring makes sense when

a company has a few largecustomers.

A)True B)False



Before factoring a receivable, the factor will require a…............... from the bank which has been financing thebook debts through bank finance to the effect that the bank

will not create a charge against the receivables from thedate of issue of such a document.

Letter of creditIrrevocable Letter of creditLetter of disclaimer





First factor in India:

Canbank Factors Ltd.Foremost Factors

SBI FACSGlobal Trade Finance



The additional fee charged byfactor as a premium for bearingthe risk



THANK YOU !!!



The net credit period for acompany with terms of 3/10 net60 is:

A)50 days B)60 days C)10 days D)

57 days





If a firm sells goods on terms 2/30 net 60,customers who do not take the cash discount

are effectively borrowing money atapproximately 2% per year.

A)True B)False



Zebra Corp. is currently experiencing a bad debt ratio of4%. Terry is convinced that, with looser credit controls,this ratio will increase to 8%; however, she expects sales

to increase by 10% as a result. The cost of goods sold is80% of the selling price. Per $100 of current sales, whatis Terry's expected profit under the proposed creditstandards?

A)$26.0 B)$15.4 C)$13.2

D)$25.6

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Management of fin serv quiz