Set Customer Credit Limits

The Asymmetrical Information Theory points out that when two parties do transaction if they occupy asymmetrical information, "Reversible Selection" and "Moral Hazard" will happen respectively before and after transaction. The Credit Theory suggests that for there is asymmetrical information between the loan applicant and the loan holder, the loan holder should control the loan in a modest amount, but not grant a loan to fully meet the demand of the loan applicant. The theory lightens us that on the occasion of asymmetrical information, a credit limit is necessary in making a decision to grant credit to the loan applicant.In China, credit sale has become a major way of sales, and it has been used by an increasing number of enterprises. According to the figures published by the website of the National Statistic Bureau, at the end of May 2006, the net amount of Account Receivable of industrial ventures above the scale in the whole nation has reached 2.8547 trillion, an increase of 20.4%, comparing to the number of last May. When the enterprises expanding credit sale, sometimes the customers are behind in payment, which causes bad account; sometimes, the enterprises excessively expand their credit sale, not considering their capital or sales profit, therefore, many problems happen to the enterprises. So it's necessary to set a proper customer credit limit in credit sale to achieve the goal "minimum customer credit risk, maximum credit sales profit".This thesis, from the enterprise's perspective, discusses the way of setting up a customer credit limit. The existing way is that the enterprise grants the customer certain line of credit on the basis of analyzing the customer's credit. This thesis suggests that the enterprise should not only consider the line of credit of the customer, but also should consider the overall credit limit of enterprise to set up a customer credit limit. The financial ability, product market sales will affect the overall credit limit, which will eventually affect the customer's credit limit. Considering the perspective of financial ability and the maximum profit, the thesis analyses the overall credit limit in quantitative and discusses the changes of the overall credit limit in different life stages of product life. At last, it sets up a customer credit limit according to the overall credit limit of the enterprise and the...