In an analysis of alternative credit-management policies, which of the following components will cause the net present value of receivables on credit sales to increase, if everything else remains constant?
In an analysis of alternative credit-management policies, which of the following components will cause the net present value of receivables on credit sales to increase, if everything else remains constant?
A longer average collection period means that customers are taking more time to pay their invoices. If customers take longer to pay, the receivables will remain on the company's books for a longer period of time, increasing the net present value of those receivables, assuming everything else remains constant.
i dont quite understand this question and answer. Can anyone help me on this.
it is only my educational guess, but the question is about an element of the credit policy, so only one answer fits in that.
I got confused because I didn't read carefully, at first I Thought it was C because I thought it said a longer collection period, but then I realized it said a longer AVERAGE collection period. After I realized my mistake it was obvious.
When there is a loss, the receivables decrease, as well as their present value (for the same portfolio of receivables).