#1
Which of the following is a reason for extending credit to customers?
To increase sales
To decrease sales
To reduce accounts receivable turnover
To minimize risk
#2
What does Days Sales Outstanding (DSO) measure?
The number of days it takes to collect on sales
The number of days until a sale is made
The number of days inventory is held
The number of days until payment is due
#3
What is the purpose of the aging of accounts receivable?
To determine the age of the company
To assess the creditworthiness of customers
To categorize outstanding receivables by age
To calculate the total accounts receivable
#4
Which of the following is a disadvantage of factoring as a method of receivables management?
Immediate cash inflow
Loss of control over collections
Reduced risk of bad debts
Decreased liquidity
#5
Which of the following ratios measures a company's ability to cover its short-term obligations with its most liquid assets?
Current ratio
Quick ratio
Debt ratio
Inventory turnover ratio
#6
What is the formula to calculate the Quick Ratio?
(Current assets - Inventory) / Current liabilities
(Current assets + Inventory) / Current liabilities
Current assets / Current liabilities
Current assets / (Current liabilities - Inventory)
#7
What is the purpose of the cash conversion cycle (CCC) in receivables management?
To measure the efficiency of cash flow
To calculate the average collection period
To assess the liquidity position of a company
To evaluate the time it takes to convert inventory into cash
#8
What is the formula to calculate the Average Collection Period (ACP)?
ACP = 365 / Receivables Turnover Ratio
ACP = Receivables Turnover Ratio / 365
ACP = Accounts Receivable / Sales
ACP = Sales / Accounts Receivable
#9
What is the main objective of credit policy in receivables management?
To maximize the number of customers
To minimize the risk of bad debts
To increase the average collection period
To decrease the accounts payable turnover ratio
#10
What does the Receivables Turnover Ratio measure?
The speed at which a company collects its receivables
The amount of credit sales a company makes
The profitability of a company
The average age of a company's receivables
#11
Which of the following is a factor affecting credit policy decisions?
Government regulations
Competitors' credit policies
Customer demographics
All of the above
#12
Which of the following is a characteristic of an effective credit policy?
Offering lenient credit terms
Ignoring customer creditworthiness
Regularly reviewing credit limits
Providing no discounts for early payment
#13
What is the purpose of a credit scoring system?
To increase the average collection period
To evaluate the creditworthiness of customers
To decrease sales
To reduce accounts receivable turnover
#14
What does the Debt Collection Period measure?
The time it takes to collect on accounts receivable
The time it takes to pay off debt
The time it takes to convert inventory into sales
The time it takes to issue credit to customers
#15
Which of the following techniques is used to accelerate the collection of accounts receivable?
Factoring
Cash discounts
Increasing credit terms
Writing off bad debts
#16
What is the primary purpose of the collection float?
To speed up the process of collecting receivables
To delay the payment of accounts payable
To measure the efficiency of receivables management
To calculate the average collection period
#17
Which of the following is NOT a method to mitigate credit risk?
Credit insurance
Factoring
Credit scoring
Increasing credit terms
#18
What is the main purpose of credit analysis in receivables management?
To increase sales
To assess the creditworthiness of customers
To reduce the accounts receivable turnover ratio
To minimize the risk of bad debts
#19
What is the primary disadvantage of outsourcing collections?
Increased control over collections
Reduced cost
Loss of customer relationships
Improved cash flow