You are considering switching from an all cash credit policy to a net 30 credit policy. You do not expect the switch to affect either

You are considering switching from an all cash credit policy to a net 30 credit policy. You do not expect the switch to affect either your sales quantity or your sales price. Ignoring interest and assuming that every month has 30 days, your net present value of the switch will be equal to:    A.  zero. B.  your selling price per unit. C.  your selling price per unit multiplied by -1. D.  your selling price per unit multiplied by -30. E.  your total monthly sales multiplied by -1. Refer to section 20.3

37.

The optimal amount of credit equates the incremental costs of carrying the increase in accounts receivable to the incremental:    A.  decrease in the cash cycle. B.  benefit from decreasing the inventory level. C.  cash flows from increased sales. D.  increase in bad debts. E.  gain in net profits. Refer to section 20.4

38.

When credit policy is at the optimal point, the:    A.  total costs of granting credit will be maximized. B.  carrying costs of credit will be equal to zero. C.  opportunity cost of credit will be equal to zero. D.  carrying costs will equal the opportunity costs. E.  total costs will equal the opportunity costs. Refer to section 20.4

39.	If you extend credit for a one-time sale to a new customer you risk an amount equal to:    A.  the sales price of the item sold. B.  the variable cost of the item sold. C.  the fixed cost of the item sold. D.  the profit margin on the item sold. E.  zero. Refer to section 20.5

40.

Which one of the following statements is correct?    A.  If the majority of a firm's new customers become repeat customers then there is a strong argument against extending credit even if the default rate is low. B.  A customer's past payment history reveals little information in relation to his or her future tendency to pay. C.  A suggested policy for offering credit to new customers is to limit the amount of their initial credit purchase. D.  The risk of issuing credit is the same for a new customer as it is for an existing customer. E.  The recommended credit policy for new customers is to extend the maximum amount of credit you will ever be willing to offer as an enticement to get their business. Refer to section 20.5