Nicholas, J; Holt, G D and Mihsein, M (2000) Contractor financial credit limits; their derivation and implications for materials suppliers. Construction Management and Economics, 18(5), pp. 535-545. ISSN 01446193
Abstract
Current methodologies for 'calculating' contractors' credit limits (for supply of construction materials) are discussed and critically appraised. It is highlighted that credit limit imposition should be a function of a supplier's financial characteristics as well as potential debtors' probability of defaulting upon repayment. A conceptually new approach is presented to identify whether an additional contractor's trade results in a worthwhile gain in utility for the supplier. It is identified, inter alia, that (i) allowing very few contractors credit facilities that account for a large proportion of suppliers' potential profits, (ii) having inaccurate creditworthiness evaluation procedures, and (iii) operating on low targeted profit margins are the characteristics that inflict maximum financial risk upon materials suppliers.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | contractors' credit limits; debtors; materials suppliers; risk; utility theory |
| Index terms: | construction material, profit, utility theory, methodology |
| Subjects: | economic analysis, building materials, research methods, economic theory |
| Topics: | Research Practice, Engineering Principles, Business Strategy |
| Descriptive scope: | 3 PCT |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here