Distinguish between a credit policy and a working capital policy.

CPA-Financial-Management-Section-3 Revision kit

Credit policy – a policy of managing debtors or accounts receivable of the firm in order to minimize bad debts, debt collection and administration cost and cost of financing debtors (capital tied up in debtors)
– Working capital policy – policy of administration of working capital in particular debtors, cash and stock in order to
(i) Identify the optimal mix of each component of working capital
(ii) Improve the firms liquidity position

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