Chapter 29: Credit Management

Question 1

net credit period

Answer 1

the length of time the customer has to pay

Question 2

cash discount period

Answer 2

the time during which the discount is available

Question 3

3/10 net 30

Answer 3

3% off if paid within 10 days, must pay within 30 days

Question 4

promissory notes

Answer 4

are IOUs that are signed after the delivery of goods

Question 5

commercial drafts

Answer 5

call for a customer to pay a specific amount by a specific date. the draft is sent to the customer’s bank. when the customer signs the draft, the goods are sent

Question 6

banker’s acceptances

Answer 6

allow a bank to substitute its creditworthiness for that of the customer, for a fee

Question 7

conditional sales contracts

Answer 7

let the seller retain legal ownership of the goods until the customer has completed payment

Question 8

factoring

Answer 8

the sale of a firm’s accounts receivable to a financial institution (known as a factor)