Credit evaluation, Managerial Accounting

One of the significant elements of credit management is the assessment of the credit risk of the customer.  As assessing risk two kind of errors arise that are as follows.

Type 1 error: Good customers are misclassified as compare to poor credit risk

Type 2 errors: Bad customers are misclassified as compare to the good credit risk.

Both types of the errors are costly. Type 1 error causes loss of profit on sales and also loss of good customers. And type II errors cause bad debts and other costs related with the bad debts. These types of errors can't be entirely removed but an exact credit evaluation process can reduce these two kinds of errors. The credit evaluation process includes the subsequent steps.

1) Credit information

2) Credit investigation

3) Credit limits

4) Collection policy.

Posted Date: 4/9/2013 5:18:49 AM | Location : United States

Related Discussions:- Credit evaluation, Assignment Help, Ask Question on Credit evaluation, Get Answer, Expert's Help, Credit evaluation Discussions

Write discussion on Credit evaluation
Your posts are moderated
Related Questions
Computing equivalents units and assigning costs to completed units and ending work in process; no beginning inventory or cost transferred in (30 -45min) Sue Electronics makes CD

Kaizen and management Management has two major components: 1) Maintenance 2) Improvement. The aim of  the maintenance function is to maintain current technological man

BUDGET PROBLEM The Budget Director of Dave, Inc. with the assistance of the Controller, Production Manager and the Sales Manager has gathered the following data for use in develop

Frontier Sports sells hunting and fishing equipment and provides guided hunting and fishing trips. Frontier Sports is owned and operated by Wally Schnee, a well-known sports enthus

Western States Supply, Inc. (WSS), consists of three divisions—California, Northwest, and Southwest—that operate as if they were independent companies. Each division has its own sa

What are the features of performance budgeting The main features of performance budgeting are:  a)  Classification into functions activities or programmers.  b)  Specifyi

Laplace Criterion of Rationality This criterion holds that if decision makers do not know the probabilities of the various states of nature and have no reason to think otherwis

How do you compare two companies operating leverage? Must the sales volume be set the same or the net operating income?

Define the modes of Hybrid Instrument? 1. What are a variety of investment risks. Describe them. 2. Define the modes of Hybrid Instruments and clarify their features.

Collection float considers to the gap among the times, payment is made through the customer/debtor and the time while funds are obtainable for use in the company's bank account. In