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1. What are the marginal returns and costs associated with a more liberal extension of credit to a firm's customers?
2. What are the major credit policy variables a firm can use to control its level of receivables investment?
3. Define the following terms:
a. Average collection period
b. Bad-debt loss ratio
c. Aging of accounts
4. Discuss at least two reasons why a firm might want to offer seasonal datings to its customers.
5. Describe the marginal costs and benefits associated with each of the following changes in a firm's credit and collection policies:
a. Increasing the credit period from 7 to 30 days
b. Increasing the cash discount from 1 to 2 percent
c. Offering a seasonal dating credit plan
d. Increasing collection expenditures (and effort).
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