1.Which one of the following best defines the term collection policy? (2pts)

Process of determining the probability customers will not pay

Set of guidelines used by a firm to determine the cost of offering credit to its customers

Daily process of handling cash inflows and outflows of cash

Set of procedures a firm follows in collecting accounts receivable

2.Which one of the following statements is correct? (2pts)

Firms should generally finance all of their assets with long-term debt.

Firms that follow restrictive financial policies can generally avoid short-term debt financing.

Long-term interest rates tend to be more volatile than short-term rates.

A firm is less apt to face financial distress if it adopts a flexible financial policy rather than a restrictive policy.

3.Which one of the following best describes a line of credit? (2pts)

Short-term loan secured by accounts receivable

Short-term loan secured by inventory

Long-term, prearranged, non-committed bank loan

Short-term prearranged bank loan that can be either committed or non-committed