Inventory Management and Accounts Receivable Quiz

The outstanding amount of money owed to a company by its customers for goods or services purchased on credit.

The level of risk a company is willing to take when extending credit to customers.

Factors that assess a customer's creditworthiness, including character, capacity, capital, condition, and collateral.

A customer's willingness to pay back a loan, based on their past payment history and reputation.

A customer's ability to generate enough cash flow to meet their financial obligations, including loan payments.

The value of a customer's assets, which can be used as a source of repayment if they default on a loan.

A customer's overall financial situation and external factors that can affect their ability to repay a loan.

Assets that a borrower pledges as security for a loan, which the lender can claim if the borrower fails to repay.

The conditions under which credit is given to customers, focusing on payment terms like cash discounts for early payments, the discount period, the total credit period, and any penalties for late payments.

Assets pledged as security for a loan, which a lender can claim if the borrower defaults on the loan.

The time period within which a customer is expected to pay for goods or services purchased on credit. This often includes early payment discounts and penalties for late payments.

An incentive offered to customers to encourage early payment of their bills, typically providing a discount on the original price.

Payment must be received before goods are shipped, minimizing credit risk.

The cost associated with placing and receiving orders for inventory, including processing, phone calls, typing, mailing, and receiving orders.

The cost of holding inventory in stock, including transportation, insurance, and storage costs.

The total cost of inventory management, calculated by adding the total ordering cost and the total carrying cost.

Formula for calculating the total ordering cost: Total Ordering Cost = (Number of orders per period) X Order cost per order.

Formula for calculating the total carrying cost: Total Carrying Cost = Carrying cost per unit X (Average inventory) + Safety stock.

The quantity of inventory that minimizes total inventory costs, balancing ordering costs and carrying costs.

A method for reducing inventory costs by ordering larger quantities at a time, potentially leading to lower per-unit costs.

The process of managing inventory levels to meet demand while minimizing costs.

A payment term meaning a 2% discount is given if payment is made within 10 days of the shipment date, otherwise the full amount is due within 30 days.

A payment term where a 2% discount is offered if the invoice is paid by the 10th day of the month following the shipment date, otherwise the full amount is due within 30 days.

A payment term where a 2% discount is offered if the invoice is paid by the 10th day of the month following the shipment date, otherwise the full amount is due within 40 days.

A payment term where a 2% discount is offered if the invoice is paid within 10 days of receiving the invoice, otherwise the full amount is due within 40 days.

The process of collecting overdue payments from customers.

A series of actions taken to encourage overdue customers to pay their bills.

Strong measures taken to recover overdue payments, such as legal action.

The raw materials used in the beginning of the production process.

The optimal order quantity that minimizes total inventory costs, balancing ordering costs and holding costs.

The point at which a new order must be placed to avoid stockout, considering lead time demand and safety stock.

Extra inventory held to buffer against uncertainties in demand or lead time, ensuring enough stock to meet demand.

The cost of holding one unit of inventory for a specific period, typically one year.

The cost incurred each time an order is placed, including processing, transportation, and handling.

The average number of units of inventory on hand during a given period.

The time it takes to receive an order after it has been placed, including processing and transportation.

The Economic Order Quantity (EOQ) is the optimal order quantity that minimizes the total inventory cost, including ordering costs and holding costs.

The Economic Order Quantity (EOQ) formula helps determine the ideal quantity of inventory to order at a time, minimizing total costs.

The reorder point is a threshold that triggers a new order for inventory. It's calculated by considering lead time, daily usage, and safety stock.

Safety stock is extra inventory kept on hand to buffer against potential supply disruptions or unexpected increases in demand. It acts as a safety net.

The formula for safety stock considers the lead time, demand, and a factor to account for uncertainty.

Inventory usage is the process of using up inventory over time. It can often be visualized as a sawtooth pattern.

This model assumes consistent demand and timely delivery, creating a predictable and efficient flow of inventory.

Uncertainty in demand and delivery can cause inventory levels to fluctuate, leading to potential shortages or excess inventory.