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In the discussions it has been clearly shown that the firm’s objective with respect management is not to collect receivables quickly, hut attention should also given to the benefit-cost trade-off involved in the various areas of accounts receivable management. The first decision area is credit policies. The credit of a fine provides the -framework to determine (a) whether or not to extend credit to a customer and (b) how much credit to extend. credit policy decision of a fine has two dimensions: (i) Credit standards and (ii) Credit analysis. A firm has to establish and use standards in making credit decisions, develop appropriate sources of credit information and methods of credit analysis. ~’e illustrate below how these two are relevant to the accounts receivable management of a firm.

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