CCP Trade Credit Terms & DSO 3

Question 1

A customer with net 30 terms has an invoice dated March 15. Adding a 3-day mail float, the expected payment receipt date is approximately:

Accepted Answer

April 17

Answer

Net 30 from March 15 = April 14 due date; adding 3-day mail float puts expected receipt at April 17.

Question 2

Which DSO benchmark method compares the current AR balance only against the most recent months of sales?

Accepted Answer

Countback (rollback) method

Answer

The countback (rollback) method matches the AR balance against the most recent months' sales, eliminating distortion from seasonal sales swings.

Question 3

Terms of 'net 60 MOM' mean the invoice is due:

Accepted Answer

60 days from end of the month of invoice

Answer

MOM (middle of month) or EOM variants anchor the due date to month-end; net 60 MOM = 60 days after the last day of the invoice month.

Question 4

A company's Best Possible DSO is 22 days and its actual DSO is 38 days. The Delinquency DSO is:

Accepted Answer

16 days

Answer

Delinquency DSO = Actual DSO − Best Possible DSO = 38 − 22 = 16 days, representing avoidable collection delays.

Question 5

Which payment term is most common in international trade to minimize seller credit risk before shipment?

Accepted Answer

Cash in advance (CIA)

Answer

Cash in advance eliminates seller credit risk entirely because payment is received before goods are shipped.

(CCP) Certified Credit Professional Practice Test