Essentials of Financial Management, 5th Edition by Pearson

CHAPTER 15

Credit Management

LEARNING OBJECTIVES

• Emphasize the need and goals of establishing a sound credit policy.
• Show how an optimum credit policy can be established.
• Explain the credit policy variables.
• Indicate the credit procedure for and control of individual accounts.
• Explain the methods of monitoring credit.

INTRODUCTION

Trade credit happens when a firm sells its products or services on credit and does not receive cash immediately. It is an essential marketing tool, acting as a bridge for the movement of goods through the production and distribution stages to customers. A firm grants trade credit to protect its sales from the competitors and to attract the potential customers to buy its products at favourable terms. Trade credit ...