Optimal Trade Credit Limits

Frederick C. Scherr

Financial Management, 1996, vol. 25, issue 1

Abstract: Trade credit limits trigger action in the management of accounts receivable. In practice, these limits are usually set by unaided managerial judgment. This paper develops two methodologies based on wealth maximization: information credit limits and risk credit limits. Information limits signal the need for additional credit investigation. Risk credit limits are maximums applied to order size or accounts receivable balances and represent the point at which the marginal present value of granting further credit becomes negative because of increases in risk or unit costs.

Date: 1996
References: Add references at CitEc
Citations: View citations in EconPapers (5)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fma:fmanag:scherr96

Access Statistics for this article

Financial Management is currently edited by Bill Christie

More articles in Financial Management from Financial Management Association University of South Florida 4202 E. Fowler Ave. COBA #3331 Tampa, FL 33620. Contact information at EDIRC.
Bibliographic data for series maintained by Courtney Connors ( this e-mail address is bad, please contact ).