CCP Trade Credit Terms & DSO 5

Question 1

Which of the following changes would most directly reduce DSO without changing credit terms?

Accepted Answer

Implementing automated invoice delivery and follow-up

Answer

Automated invoicing and follow-up accelerates customer awareness and reduces processing delays, shortening the collection cycle.

Question 2

Under 'advance dating' terms, the invoice date is set in the future. The primary purpose is to:

Accepted Answer

Allow the buyer extra time to sell goods before payment is due

Answer

Advance dating pushes the invoice start date forward, effectively giving the buyer more time to sell inventory before the payment clock begins.

Question 3

A DSO of 45 days against net 30 terms produces what is called:

Accepted Answer

Days delinquent

Answer

Days delinquent (or delinquency DSO) is the portion of actual DSO that exceeds the contractual net terms.

Question 4

A credit professional reviewing an aging report sees that 40% of AR is over 60 days past due. This most directly suggests:

Accepted Answer

A significant collection problem or deteriorating customer quality

Answer

A high percentage of AR past 60 days signals either chronic slow payers or customers experiencing financial difficulty.

Question 5

Which term refers to a credit arrangement where the seller's terms reset at the beginning of each calendar month regardless of invoice date?

Accepted Answer

Prox (proximo)

Answer

Proximo (prox) terms set the due date on a specific day of the month following the invoice, effectively resetting each calendar month.

(CCP) Certified Credit Professional Practice Test