What Credit Decision Is Appropriate for a Potential Customer That

question 33

Multiple Choice

What credit decision is appropriate for a potential customer that offers an 80% chance of paying on a $10,000 (present value) sale that has an 80% (present value) cost?

• A)Grant credit since expected profit is $3,200
• B)Grant credit since expected profit is $800
• C)Refuse credit since expected profit is zero
• D)Refuse credit since expected loss is $3,000 Expected profit from offering credit:
• = p x PV(Rev - cost) - (1 - p) x PV(cost)
• = )8 x PV($10,000 - 8,000) - .2 x PV(8,000)
• = PV1,600 - PV1,600

Understand the different types of controls (feedback, feedforward, and concurrent) and their relevance to the input-throughput-output cycle of an organization.

Identify how controlling assists in ensuring that organizational activities are in alignment with set plans and objectives.

Recognize the importance of both internal and external control strategies for effective organizational control.

Distinguish between the central questions and focuses of feedforward, concurrent, and feedback controls.

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Definitions:

Hands-On Philosophy

An approach that emphasizes direct involvement and active participation in tasks or projects.

Entrepreneurial Revolution

A significant shift towards entrepreneurship and innovation, transforming traditional industries and creating new economic opportunities.

Competitiveness

The ability of a company or a nation to offer products and services that meet the quality standards of the local and global markets at prices that are competitive.

David Birch

An American economist noted for his research on job creation, small and medium enterprises, and entrepreneurial activity.