A firm may require cash on or before delivery in payment for its products, or it may decide to extend credit to its customers. If credit is extended, the firm must establish a credit policy, which involves three components: terms of the sale, credit analysis, and collection policy. These decisions impact the level and composition of receivables. Similarly, the amount and types of inventory held reflect managerial decisions regarding the costs of ordering and holding inventory. Accordingly, we consider several techniques for managing inventory.