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    Receivables Management and Factoring

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    pandubhagya
    Receivables Management and Factoring in This Module We Will Study: Nature and Goals of credit policy Credit Policy Variables credit Evaluation of Individual accounts Monitoring receivable Summary of Key Concepts Financial Management, Ninth Edition (c) I M Pandey Vikas Publishing House Pvt. Ltd.

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    Receivables Management and Factoring

    Uploaded by

    pandubhagya
    135 views11 pages
    Receivables Management and Factoring in This Module We Will Study: Nature and Goals of credit policy Credit Policy Variables credit Evaluation of Individual accounts Monitoring receivable Summary of Key Concepts Financial Management, Ninth Edition (c) I M Pandey Vikas Publishing House Pvt. Ltd.

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    Module 3

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    Receivables Management and Factoring in This Module We Will Study: Nature and Goals of credit policy Credit Policy Variables credit Evaluation of Individual accounts Monitoring receivable Summary of Key Concepts Financial Management, Ninth Edition (c) I M Pandey Vikas Publishing House Pvt. Ltd.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    135 views11 pages

    Receivables Management and Factoring

    Uploaded by

    pandubhagya
    Receivables Management and Factoring in This Module We Will Study: Nature and Goals of credit policy Credit Policy Variables credit Evaluation of Individual accounts Monitoring receivable Summary of Key Concepts Financial Management, Ninth Edition (c) I M Pandey Vikas Publishing House Pvt. Ltd.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 11

    Receivables Management and Factoring

    In This Module We Will Study:


    Nature and Goals of Credit Policy Optimum Credit Policy

    Credit Policy Variables


    Credit Evaluation of Individual Accounts Monitoring Receivable

    Summary of Key Concepts

    Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

    Nature of Credit Policy


    Investment in receivable volume of credit sales collection period Credit policy credit standards credit terms collection efforts

    Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

    Goals of Credit Policy


    Marketing tool Maximisation of
    Costs & Benefits Profitability

    sales Vs. incremental profit

    production and selling costs administration costs bad-debt losses

    Liquidity Tight Credit policy Loose

    Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

    Optimum Credit Policy


    Estimation of incremental

    profit Estimation of incremental investment in receivable Estimation of incremental rate of return (IRR) Comparison of incremental rate of return with required rate of return (RRR) Optimum credit policy: IRR = RRR

    Costs & Return (%) Marginal cost of capital

    Marginal rate of return Tight Credit policy Loose

    Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

    Credit Policy Variables


    Credit standards
    Credit analysis collection period default rate

    character capacity condition capital collateral

    Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

    Credit Policy Variables

    customer categories

    good accounts bad accounts marginal accounts ad hoc approach simple discriminant approach multiple discriminant approach

    numerical credit scoring


    Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

    Credit Policy Variables


    Credit-Granting Decision
    CREDIT GRANTING DECISION

    NO CREDIT

    GRANT CREDIT

    PAYMENT RECEIVED BENEFIT PV OF FUTURE NET CASH FLOWS NO PAYOFF

    PAYMENT NOT RECEIVED COST PV OF LOST INVESTMENT

    NET PAYOFF PV OF (BENEFIT - COST)

    Credit-granting Decision

    Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

    Credit Policy Variables


    Credit terms credit period cash discount Collection policy and procedures regularity of collections clarity of collection procedures responsibility for collection and follow-up case-by-case approach cash discount for prompt payment

    Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

    Credit Evaluation of Customers


    Credit information financial statements bank references trade references Credit investigation and analysis analysis of credit file financial analysis analysis of business and management Credit limit Collection efforts
    Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd. 10

    Monitoring Receivable
    Collection period Aging schedule

    Collection experience matrix

    Financial Management, Ninth Edition I M Pandey Vikas Publishing House Pvt. Ltd.

    11

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