Risk Analysis_Chapter 6 HW

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Q 1. What are the key variables for evaluating credit policy changes, according to credit managers? Are managers able to estimate the values for these variables adequately? Compare and contrast the incremental profit and NPV approaches to evaluating credit policy decisions.

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The dollar profits effect, the effect on sales, the effect on receivables, the effect on investment return should be taken into consideration by one when changes in the terms of credit are evaluated. An ability to include risk of credit policy (probability of delinquency, funds’ cost of opportunity, probability of default, limits of credit, and overall capital cost) was expressed by the managers surveyed when decisions were made regarding terms of credit. Knowing the per

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