Question

Receivables are for many companies a very important asset on the balance sheet – and the...

Receivables are for many companies a very important asset on the balance sheet – and the final step before receiving cash. Please explain what elements a credit policy of companies should contain in order to have high assurance for the collection of the receivables. Provide at least 3 elements

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Answer #1

Element of credit policy to have high assurance of collection of the receivables -

1. Credit rating - Good credit rating means there are high chances that payment shall be received with the time allowed to make payment. Credit should be allowed to those who ahs very good credit rating.

2. Credit Period - It is time allowed to pay the credit allowed to the buyer. Interest can charged in case of dealyed payment.

3. Credit policy decision - It is deciding about how much portion of total sales can be made on credit basis. Credit should be offered on basis of past payment history.  

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