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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

How can the use of collateral in receivables impact a company's credit rating and its ability to obtain additional credit?

Using collateral prevents a company from obtaining any further credit until the collateral is released.

Using collateral can improve a company's credit rating by reducing the lender's risk, making it easier to obtain additional credit.

Using collateral always decreases a company's credit rating because it signals financial instability.

Collateral has no impact on a company's credit rating or its ability to obtain credit.

Previous problemNext problem

Verified step by step guidance

Understand the concept of collateral: Collateral is an asset pledged by a borrower to secure a loan, reducing the lender's risk in case of default. It plays a significant role in financial transactions and credit evaluations.

Analyze the impact of collateral on credit rating: Collateral can improve a company's credit rating because it reduces the lender's risk. A lower risk profile often leads to better credit ratings, as lenders view the company as more reliable.

Evaluate the relationship between collateral and obtaining additional credit: By improving the credit rating, collateral can make it easier for a company to obtain additional credit. Lenders are more likely to extend credit to companies with strong credit ratings and secured loans.

Address misconceptions: Using collateral does not always decrease a company's credit rating. While it may signal financial instability in some cases, the primary effect is often positive due to reduced lender risk.

Clarify the correct answer: The correct answer is that using collateral can improve a company's credit rating by reducing the lender's risk, making it easier to obtain additional credit. This is because lenders are more confident in extending credit when their risk is mitigated.