1. F Ltd. is examining the relaxation of its credit policy. It sells at present 20,000 units at a price of ₹ 100 per unit, the variable cost per unit is ₹ 88 and the average cost per unit at the current sales volume is ₹ 92. All the sales are on credit, the average collection period being 36 days. A relaxed credit policy is expected to increase sales by 10% and the average age of receivables to 60 days. Assuming a 15% return, should F Ltd. relax its credit policy?
Note: 1 Year = 360 days

2. When net sales for the year are ₹ 2,50,000 and debtors ₹ 50,000, the average collection period is:

3. Place the methods of collecting on delinquent accounts from the most likely lowest to highest cost.

4. XYZ Ltd. has credit sales amounting to ₹ 32,00,000. The sale price per unit is ₹ 40, the variable cost is ₹ 25 while the average cost is ₹ 32. The average age of receivables of the firm is 72 days. The firm is considering tightening the credit standards. It will result in a fall in sales to ₹ 28,00,000, and the average age of receivables to 45 days. Assume 20% of return. The proposed policy will yield –
1 Year = 360 days and debtors are calculated on cost.

5. Romaji Ltd. has sales of ₹ 1,18,00,000 and its debtor turnover ratio is 4:2. The cost of goods sold is ₹ 82,60,000. Debtors =?

6. ____ may also be offered for the early payment of dues.

7. Receivables mean ___
I. Book debts
II. Debtors
III. Account receivables
Select the correct answer from the options given below:

8. Which of the following function is required to be performed by the finance manager in relation to proper management of receivables?

9. Which one of the following would help to reduce the number of accounts receivable delinquencies?

10. An exercise of credit rating involves –

11. Risk of non-payment may due to –

12. A firm has current sales of ₹ 38,22,000. In order to boost its sales, it is considering the relaxation in its credit policy. The proposed terms of credit will be 40 days credit against the present policy of 25 days. The firm’s sales are expected to increase by 10%. As a result, debtors (calculated on sales) will be –

13. The cash discount is given to customers for:

14. The goal of receivables management is to maximize the value of the firm by achieving a trade-off between –

15. X Ltd. cash sales and credit sales are ₹ 5,67,500 & ? 87,50,000 respectively. Cost of goods sold is ₹ 61,25,000. Debtors are ₹ 8,20,833 and bills receivable are ? 2,00,000.
Debtors turnover ratio =?

16. The sales Manager of AB Ltd. suggests that if the credit period is given for 1.5 months then sales may likely increase by ₹ 1,20,000 per annum. The cost of sales amounted to 90% of sales. The risk of non-payment is 5%. The income tax rate is 30%. The expected return on investment is 13,375 (aftertax). Should the company change its credit policy?

17. In factoring arrangement the debts as and when fall due is collected by the –

18. H Ltd. has current sales of ₹ 20,00,000. It is planning to introduce a discount policy of 2/10, Net 30. As a result, the Company expects the average collection period to go down by 10 days and 80% of the sales opt for cash discount facility. The required return on investment is 20%, should it introduce the new discount policy?

19. Increasing the credit period from 30 to 60 days, in response to a similar action taken by all of our competitors, would likely result in:

20. Total sales of LMN Ltd. are ₹ 31,248 out of which 25% are cash sales. The closing balance of debtors is ₹ 9,468. Debtors velocity =?

21. The accounts receivable that cannot be collected because of their bankruptcy or another reason are termed as:

22. A firm has current sales of ₹ 2,56,48,750. It is considering the relaxation in its credit policy. The proposed terms of credit will be 60 days credit against the present policy of 45 days. As a result, the bad debts will increase from 1.5% to 2% of sales. The firm’s sales are expected to increase by 10%. Variable operating costs are 72% of sales. The firm’s corporate tax rate is 35%, and it requires an after-tax return of 15%. Should the firm change its credit period?
Note: Yes calculates its debtor on sales.

23. A decrease in the firm’s receivables turnover ratio means that –

24. Accounts receivable are reported in the balance sheet:

25. Selling accounts receivable to a third party at a reduced price is part of the collection process known as –