Types Human Theft Bounced Checks Natural Fire Flood Economic Stock market crash Competition moves in next door
Classification Result Pure Risk - vehicle in an accident Speculative Risk - stock market Controllability Do something to reduce the risk Insurability Policy to protect against a loss Has to be predictable, with statistics
Benefits of Offering Credit May help increase sales
Risks of Offering Credit Will the overall sales increase? Customers may not pay back the money owed
Types of Credit Trade Credit - business to business Pay price higher than cash price because of lapse in time to produce and deliver Consumer Credit – business to customer Loans – lump sum Credit Cards – credit limit and use as needed
Credit Policies Established to reduce risk Who may have credit Which products can be purchased with credit Terms of payment, interest, and length of time Credit application to determine credit worthiness (why?) Cannot sell used items at original price Business will lose money
Other Risks Workplace dangers Accidents International Business Language barriers Unfamiliar with laws and customs Products may not meet needs of that market Travel and shipping costs
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