Practice Test

Q1) ___ is defined by O.M Joy as ”debt owed to the firm by customers arising from sale of goods or services in the ordinary course of business”. Show Answer

Q2) Relaxed or liberal credit implies __credit to customers Show Answer

Q3) Application of stiff standards of credit to customers is likely to result in __credit. Show Answer

Q4) Cash terms implies Show Answer

Q5) 5/10 implies Show Answer

Q6) A L/C is issued by Show Answer

Q7) Credit policy has the following aspect Show Answer

Q8) Source of credit information are Show Answer

Q9) Agening schedule is Show Answer

Q10) Consignment refers to Show Answer

Q11) 5 C’s include Show Answer

Q12) Source of credit information include Show Answer

Q13) Credit standard is Show Answer

Q14) Increases in account receivable Show Answer

Q15) The cost incurred due to default in payment is Show Answer

Q16) Credit evaluation includes approval of Show Answer

Q17) Financial statement can judge Show Answer

Q18) Ageing schedule shows Show Answer

Q19) ABC analysis shows classification of debtors in Show Answer

Q20) The cost incurred to collected to collect the dues from customers is called as Show Answer

Q21) Customers are created by Show Answer

Q22) 5C of credit does not include Show Answer

Q23) Following is not an element of credit policy

Show Answer

Q24) Following is not a technique of receivable management Show Answer

Q25) Following is not a part credit policy Show Answer

Q26) Cash discount will increase Show Answer

Q27) Receivable management is concerned with Show Answer

Q28) Ageing of debtors measures Show Answer

Q29) Following is not a true statement Show Answer

Q30) Following is not a cost of maintaining receivables Show Answer

Q31) Following is the technique of monitoring account receivables Show Answer

Q32) Fixed cost is Rs. 2, 70,000 variable cost is Rs.12, 60,000. Credit period 1 mount ROI is 40%. the ROD investment is debtors is Show Answer

Q33) Fixed cost 23, 00,000 variable cost is 3, 00,000 credit period 2 months ROI 20%. the return will be Show Answer

Q34) Sales are 6,30,000, default is 1.5%.bad debts is 1%. calculate the default cost Show Answer

Q35) Evaluation of firm’s credit policy can be done by computing expected __ from it. Show Answer

Q36) If sales is 100, variable cost is 66.67 the P/V ratio would be. Show Answer

Q37) If Gross margin is 25% on Cost and Sales is Rs.21,00,000 the gross profit would be_______. Show Answer

Q38) ______ refers to customers willingness to pay the debt. Show Answer

Q39) The main objective in Accounts Receivable management is to ______ the Days Sales Outstanding (DSO) and processing costs whilst maintaining good customer relations. Show Answer

Q40) “5/15 net 45” on an invoice represents _______ discount provided by the seller to the buyer on account of prompt or pre-payment. Show Answer

Q41) ___ policy refers to the procedures followed to collect accounts receivable after the expiry of the credit period. Show Answer

Q42) The optimum investment in receivables will be at a level where there is a trade-off between costs and profitability. Show Answer

Q43) A firm will be able to sell more goods and services, if trade credit is granted instead of insisting for cash payment . Show Answer

Q44) Receivables act as an attracting device for potential customers and retaining the older ones. Show Answer

Q45) Delinquency cost arises as a result of complete failure of a defaulter (customer) to pay anything to the firm. Show Answer

Q46) In a competitive market, a higher volume of sales is made on credit. Show Answer

Q47) A lenient credit policy discourages the financially sound customers to delay payments. Show Answer

Q48) Organisations must not waste time in the determination of sound and effective credit collection policies management, rather it must focus on increasing its sales. Show Answer

Q49) Ordering costs impacts the maintenance of receivables. Show Answer

Q50) Bad debts are not accounted for under recourse factoring. Show Answer

Q51) Cash sales results in account receivable. Show Answer

Q52) The credit policy which has minimum benefit should be recommended to management. Show Answer

Q53) An aging schedule is an accounting table that shows the relationship between a company’s bills and invoices and their respective due dates. Show Answer

Q54) Relaxed or liberal credit implies lower credit to customers Show Answer

Q55) Higher the receivable , lower the capital cost. Show Answer

Q56) Bad debt expenses or default costs increase with relaxation of credit and vice versa Show Answer

Q57) When credit period is increased the sales volume, average collection period and bad debt expenses decrease. Show Answer

Q58) Reduction in collection period would result in reduction in investment in receivables. Show Answer

Q59) Account receivable is a part of current assets. Show Answer

Q60) Cash sales result in account receivable. Show Answer

Q61) Credit scale result in account receivable. Show Answer

Q62) Receivable management affects shareholder value Show Answer

Q63) Credit terms are specified in the invoice. Show Answer

Q64) A letter of credit is issued by a bank on behalf of its customers. Show Answer

Q65) Credit period is the time allowed to customers to pay for their purchases. Show Answer

Q66) Bank reference is the source of credit information. Show Answer

Q67) ABC analysis is a technique of controlling debtors. Show Answer

Q68) Defaulting cost is not a part of cost of receivables. Show Answer

Q69) Credit policy decides credit standards. Show Answer

Q70) The standards are the minimum requirement for granting credit are termed as credit standards. Show Answer

Q71) Raw material cost is the cost of receivables. Show Answer

Q72) Bank provide credit information to the customers Show Answer

Q73) Default cost is the cost of receivable. Show Answer

Q74) Delinquency cost is not included in cost receivable Show Answer

Q75) Procedures to collect the receivables is called as collection policies. Show Answer

Q76) Credit policy provides information about the period of credit allowed to customers. Show Answer