STFM

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Author:
Anonymous
ID:
70588
Filename:
STFM
Updated:
2011-03-04 03:07:34
Tags:
cowbeans
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Zlorget
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  1. What is trade credit?
    When goods are sold and payment is delayed
  2. What are the motives for extending credit?
    • Financial Motive
    • Operating motive
    • contracting motive
    • pricing motive
  3. What is the financial motive for extending credit
    • - More sales
    • - higher price
    • - lower probability of default because of specialized knowldge of seller
  4. What is the operating motive for extending credit?
    Insentivise buyers if product is seasonal.

    also operations are ... better?
  5. What is the contracting motive for extending credit?
    • For buyer - they can inspect goods before payment
    • For seller - Better internal controals, less theft
  6. What is the pricing motive for extending credit?
    In a govt regulated industry you can extend the credit terms to decrease PV in leiu of changing the price.
  7. How can you add value through trade credit?
    • - Manage total investment in recievables
    • - How long you make the terms
    • - Who you extend credit to
    • - Ensuring you collect
  8. Who is the example of messing everything up becuase of credit and billing problems.
    Xerox totally screwed up when they tried to consolidate their stuff and got nothing right.
  9. What is the basic credit granting model?
    NPV = (Sales - Expenses)/(1+ daily intrest rate * credit period)
  10. What are 3 types of credit extension?
    • Open account (or line of credit)
    • Installment credit
    • Revolving credit
  11. What is an open account or line of credit?
    No interest, payment due on invoice terms, payment restores available credit.
  12. What is installment credit?
    There is interest, Equal payments of principle and interest usually monthly, payment doesn't restore credit available.
  13. Revolving credit... what is it?
    There is interest, monthly billing
  14. What are the four componenets of a credit policy?
    • 1. credit standards (minimally acceptable customer)
    • 2. Credit terms (credit period and discount, collateral)
    • 3. Credit limit (per customer and aggregate)
    • 4. Collection procedures
  15. What are the four steps to the credit?
    • 1. Gather neccecary information
    • 2. Complete a credit analysis
    • 3. Determine risk rating
    • 4. Set size of credit limit
  16. Where are some places you can collect data from?
    • Field data collected (sales force)
    • Internal pmt history
    • Credit bureaus
  17. What do you use to analyze credit?
    • The five "C"s
    • Ratio analysis
  18. What are the 5 "C"s?
    • Character - Precieved honesty/willingness to pay
    • Capacity - Cash flows, can they pay?
    • Capital - If insufficiant cash flows, can they be created?
    • Collateral - Can they secure it?
    • Conditions - general economic environment
  19. What is the risk rating?
    rating determines order size withour additional credit approval
  20. What elements go into setting size?
    • Customer need/request
    • 10% net worth
    • percent of high credit
    • suggestion in customers BIR from D&B
  21. Cash application
    give up.
  22. order entry first to cash application. Magnetic Ink. MICR.... whatev
  23. what equation do you use for the credit?
    The giant one.
  24. What are traditional methods of collection monitering?
    • Aging schedules - most favored
    • DSO - Almost as good
    • Receivables turnover - worst
  25. What are some new credit monitering techniques?`
    • Uncollected balance percentage
    • DSO with monthly sales information
  26. what is the problem with traditional methods?
    The are all influenced by sales changes. Sales increase improves aging schedules, worsens DSO and turnover.
  27. What are typical collection procedures?
    • Contact within ten days of delequency
    • Reminder letter and phone call
    • Sales force notified
    • refer to collection agency
  28. International credit is harder.
    Longer periods, harder to get D&B reports
  29. What are some kinds of float?
    • Mail float - controaled by payor by being far away
    • Processing float - controalled by payee
    • Clearing or availablility float - bank
  30. what are paper based payments
    checks (primary paper) and drafts
  31. Types of float again
    • collection - until credited to payees account
    • disbursment - until its charged to payors account

    depends on pov
  32. MICR code. Business check. Whateva.
    • auxiliary on us field
    • traurir routing no?
    • Payor's #
    • something encoded
  33. On us items
    • payee deposits check in bank
    • bank credits depositors acount
    • bank debits payors account
    • wtf?
  34. check clearing process
    • the key event is presentment - the delivery to the paying bank
    • wtf
  35. check clearing mechanisms
    • paper
    • - house/on us checks
    • - transit items

    • electronic
    • - ECP - electronic check processor
    • - Image exchange

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