Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

Which of the following is NOT typically considered a factor on which credit is based when evaluating receivables?

Character of the borrower

Amount of inventory on hand

Collateral offered

Capacity to repay

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Verified step by step guidance

Step 1: Understand the concept of credit evaluation. Credit evaluation is the process of assessing the creditworthiness of a borrower, typically based on factors such as their ability to repay, financial stability, and the security they can offer.

Step 2: Review the common factors used in credit evaluation. These factors often include: (1) Character of the borrower, which refers to their reputation and reliability; (2) Capacity to repay, which assesses their financial ability to meet obligations; and (3) Collateral offered, which is the security or assets pledged to secure the loan.

Step 3: Analyze the given options. The options provided are: (1) Character of the borrower, (2) Amount of inventory on hand, (3) Collateral offered, and (4) Capacity to repay.

Step 4: Evaluate the relevance of 'Amount of inventory on hand.' While inventory is an asset, it is not typically a direct factor in credit evaluation unless it is being used as collateral. Credit evaluation focuses more on the borrower's character, capacity, and collateral.

Step 5: Conclude that 'Amount of inventory on hand' is not typically considered a factor in credit evaluation, as it does not directly assess the borrower's creditworthiness in the same way as the other factors listed.