Anita Khan Sells Lawn and Garden Products in Bulk to Companies

question 28

Multiple Choice

Anita Khan sells lawn and garden products in bulk to companies that do lawn and garden work. She extends credit to her customers for 60 days, but she is worried about cash flow problems. But this is a highly competitive business and most of her competitors also offer credit-some of them for up to 90 days. Anita is also concerned with the cost of billing and collecting money from her customers, some of whom make it a habit of paying late. Which of the following is the most useful advice to Anita?

• A) Anita can reduce her cash flow issues by extending credit for 90 days.
• B) Anita would be able to generate more sales and reduce her collection costs by cutting the credit period to 30 days.
• C) Anita should consider selling her receivables to a factor, thus allowing her to receive cash more quickly and eliminate the hassles associated with collections.
• D) Anita should consider a "cash only" policy and eliminate credit sales. This would eliminate her cash flow problems and free up money and other resources that she now devotes to collecting past-due accounts.

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Definitions:

Industrial Revolution

A period of major industrialization from the late 18th to early 19th century that transformed mainly rural, agrarian societies in Europe and America into industrialized, urban ones.

Wright's Paintings

May refer to the artworks created by one of several artists with the last name Wright, known for their distinctive styles and contributions to their field.

Industrialists

Individuals or groups involved in the ownership and management of industries, often characterized by significant innovations, manufacturing processes, and the exploitation of labor.

Joseph Wright of Derby

An 18th-century English painter, known for his use of light and shadow, and for pioneering subjects in science, industry, and literature within his works.