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).