Ch. 16 Pricing and Credit Decisions Flashcards
The most significant piece of credit legislation; consumers are informed about the terms of a credit agreement and to require creditors to specify how finance charges are computed. The act requires that a finance charge be stated as an annual percentage rate and that creditors specify their procedures for correcting billing mistakes.
The federal Consumer Credit Protection Act, which includes the 1968 Truth-in-Lending Act
A categorization of accounts receivable based on the length of time they have been outstanding.
aging schedule
An approach in which the total cost for a given period is divided by the quantity sold in that period to set a price.
average pricing
Bad debts divided by credit sales.
bad-debt ratio
Analysis that requires the examination of cost-revenue relationships and the incorporation of sales forecasts.
break-even analysis
Sales volume at which total sales revenue equals total costs and expenses.
break-even point
Financing granted by retailers to individuals who purchase for personal or family use.
consumer credit
The difference between the unit selling price and the unit variable costs and expenses.
contribution margin
An agreement between a buyer and a seller that allows for delayed payment for a product or service.
credit
Privately owned organizations that summarize different firms’ credit experiences with individual consumers.
credit bureaus
An alternative to cash whose use provides assurance to a seller that a buyer has a satisfactory credit rating and that payment will be received from the issuing financial institution.
credit card
Demand that changes significantly when there is a change in the price of a product or service.
elastic demand
The degree to which a change in price affects the quantity demanded.
elasticity of demand
A technique that uses a particular competitor as a model in setting prices.
follow-the-leader pricing strategy
A strategy that offers customers basic features at no cost based on the idea that they will upgrade to advanced products or services at subscription prices.
freemium strategy
Demand that does not change significantly when there is a change in the price of a product or service.
inelastic demand
A line of credit that requires a down payment, with the balance paid over a specified period of time.
installment account
An approach based on setting a high price to convey an image of high quality or uniqueness.
prestige pricing
A specification of what a seller requires in exchange for transferring ownership or use of a product or service.
price
A technique that sets a range of several distinct merchandise price levels.
price line strategy
A technique that sets very high prices for a limited period before reducing them to more competitive levels.
price skimming strategy
A technique that places different prices on a range of products or services to reflect the benefits to the customer of parts of the range.
product line pricing
A line of credit on which the customer may charge purchases at any time, up to a pre-established limit, and must pay a percentage of the balance monthly.
revolving charge account
Privately owned organizations that collect credit information on businesses.
trade-credit agencies
Financing provided by suppliers to client companies.
trade-credit
The extent to which a good or service is perceived by a customer as meeting his or her needs or wants, measured by the customer’s willingness to pay for it.
value
A technique that sets more than one price for a product or service in order to offer price concessions to certain customers.
variable pricing strategy
