Found 1748 Articles for Growth & Empowerment

What are the Techniques for Monitoring of Accounts Receivables?

Probir Banerjee
Updated on 04-Jul-2022 12:21:19

1K+ Views

For a business to continue running with granting credit, it must continuously monitor the accounts receivables so that there is no laxity in the process of credit collection. There are two traditional methods that are used to monitor accounts receivables. These areAverage Collection PeriodAging Schedule.As these methods have some limitations, analysts now use the collection experience matrix method to judge the accounts receivables efficiency of a firm.Average Collection Period (ACP)The Average Collection Period Formula (ACP) is –$$\mathrm{ACP \:= \:\frac{Debtors \:\times \:360}{Credit \: sales}}$$The average collection period calculated with this formula is compared with the real collection period of the firm ... Read More

What is Collection Matrix?

Probir Banerjee
Updated on 04-Jul-2022 12:18:29

1K+ Views

The notable drawback of traditional methods of monitoring receivables is that they are dependent on aggregated data. Moreover, methods such as Average Collection Period (ACP) and aging schedule fail to relate outstanding accounts receivables of a certain period with the credit sales in that particular period of time.Therefore, two professionals can arrive at two different results when they aggregate sales and receivables data differently. How can this anomaly be resolved? The best way to remove such a problem is to use disaggregated data for analyzing collection experiences. The key here is to relate receivables to sales data in the same ... Read More

What is the use of Discriminant Analysis in Credit Score Model?

Probir Banerjee
Updated on 04-Jul-2022 12:16:15

588 Views

What is Discriminant Analysis?Apart from using a numerical scoring model, a firm may use discriminant analysis in credit scoring models.Discriminant analyses for credit scoring are divided into two sections. They are as follows −Simple Discriminant AnalysisMultiple Discriminant Analysis Models.Discriminant models are objective methods of finding the differences between good and bad customers. By applying discriminant analysis, the lending firms can discriminate good credit customers from the bad ones.Simple Discriminant Analysis ModelAs mentioned above, the simple discriminant analysis model is an objective method to separate the bad credit customers from the good ones. The lenders often look for a solid method ... Read More

What is Aging Schedule?

Probir Banerjee
Updated on 04-Jul-2022 12:14:20

480 Views

Aging ScheduleThe aging schedule is a summarized list of accounts receivable broken down into different time periods that rank the receivables depending on days until due or past due. The aging schedule is generally divided into 30 days’ categories so that the current items are listed in the 0–30 days’ category, moderately overdue items are listed in the 31–60 days’ category and very overdue are listed in other categories.ExampleCustomerTotal DueCurrent due (under 30 Days)1-30 days past due31-60 days past due61-90 days past dueMore than 90 daysCompany ABC100, 00080, 00020, 000   Company XYZ70, 000  30, 00030, 00010, 000Company AXY25, 00020, 000 5000  Total195, 000100, 00020, ... Read More

What are the Key Contents of a Credit Analysis Report?

Probir Banerjee
Updated on 04-Jul-2022 12:12:34

403 Views

What is Credit Analysis?Credit analysis is an important aspect of business organizations and lenders who offer loans or goods and services on credit. Credit analysis reveals the nature of the customers and shows the potential customer who would be either good or bad in repaying the credited amount. The findings of credit analysis are indicated via a credit report.A credit analysis report is a very important tool for lenders to grant credit to prospective borrowers. By the contents included in the report, the lenders can offer loans to the best potential borrowers.A borrower who has a good repayment record is ... Read More

What are the Steps Involved in Effective Collection Procedure?

Probir Banerjee
Updated on 04-Jul-2022 12:10:23

183 Views

Collection ProcedureCollections of credit are a very important part of the credit management process as it is the final part of the initiative. By collecting the dues, a lender completes the cycle of credit management. Since collecting the dues is the sole reason for granting credit, firms must know how to proceed with the collection process from individual customers or firms.It is, therefore, obvious that lenders or credit-grantor companies must have a well-structured plan for the collection of dues.Steps Involved in Effective Collection ProcedureFollowing are the steps for the lenders to collect the dues from the borrowers −Issuing a reminderLenders ... Read More

What are the Factors Affecting Credit Scores?

Probir Banerjee
Updated on 04-Jul-2022 12:08:43

132 Views

Credit ScoreThe lenders usually depend on a credit score to check how good or bad an individual is in repaying the debt. This score is known as a credit score. A credit score is a key to getting a new loan approved or rejected. When the credit score is above a certain mark, the lenders realize that the capacity of the borrower is enough to pay back a loan.Therefore, a good credit score helps an individual to get loans on favorable terms while a bad score makes it tough to get a new loan approved.Factors Affecting Credit ScoresThe following 5 ... Read More

Marginal Account vs. Cash Account

Probir Banerjee
Updated on 04-Jul-2022 12:06:44

137 Views

What is a Marginal Account?Marginal accounts allow investors to borrow money by putting securities they buy as collateral which can be used to buy more securities or for other purposes.The investor’s status of securities can also be viewed by a broker in the case of a marginal account. These accounts are often used by options investors who need to show collateral while shorting the options.With a marginal account, if the investor buys securities that cost more than the balance in the account, the broker automatically pays for the extra amount. Therefore, marginal accounts have an option for credit which is ... Read More

What are the 5 C's of Credit Analysis?

Probir Banerjee
Updated on 04-Jul-2022 12:04:57

203 Views

Credit AnalysisCredit analysis is an important part of businesses that provide credit to their customers in order to expand their business portfolio. However, like all other protocols of business, credit analysis is also based on some important factors.To get rid of losses created by bad debt and lengthy payments, businesses can depend on these factors to understand and apply credit analysis to their potential customers.5 C’s of Credit AnalysisThere are select parameters on which the credit analysis process rests. These are known as the 5 C’s of credit analysis. These are the following −CharacterLenders want to judge the financial character ... Read More

What are the Stages of Evaluation in Credit Analysis Process?

Probir Banerjee
Updated on 04-Jul-2022 12:03:29

297 Views

What is Credit Analysis?Every business that offers credit to its customers faces a risk of losing money in terms of bad debts. Moreover, many organizations that are granted credit may delay in making payments which may hurt the firm that offers credit to such customers. It is therefore necessary for businesses to analyze the creditworthiness of customers before the credit is granted to them.This process of analyzing the creditworthiness of customers is known as credit analysis. It should be noted that credit analysis is one of the many processes to judge the creditworthiness of customers. There are other tools to ... Read More

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