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Chapter 3: 7DQ (page 219)

What are three quantitative measures that can be applied to the collection policy of the firm?

Short Answer

Expert verified

The average collection period, bad debt to sales ratio, and accounts receivables aging are applied to the collection policy.

Step by step solution

01

Meaning of collection policy

The collection policy means the terms of the organization for collecting its debt. This process requires the organization to collect its debt and appropriately manage its current assets timely.

02

The qualitative measures applied to the collection policy

The three qualitative measures are applied in the collection policy:

  1. The average collection period is used to determine the time taken by the organization for collecting its receivables.
  2. The bad debt to sales ratio is used to determine the amount of receivables that are considered bad debts in regard to the sales made by the organization.
  3. The aging of accounts receivables is used to differentiate the different receivables based on the time of collecting them.

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Most popular questions from this chapter

In the second year, Fisk Corporation finds that it can reduce ordering costs to \(2 per order but that carrying costs stay the same at \)1.60 per unit. Also, volume remains at 49,000 units per year.

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February

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June

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February

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March

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April

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May

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June

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