In an earlier paper [2], the sequential decision process was applied to two major facets of credit management: (a) deriving unambiguous decision rules for handling individual credit requests; and (b) devising relevant credit indices for effective management control and evaluation of the system. Usefulness of the model was constrained by its static nature and by exogenous determination of other significant variables, notably, collection efforts and costs.

Dileep R. Mehta, The Impact of Outstanding Convertible Bonds on Corporate Dividend Policy, The Journal of Finance, Vol. 31, No. 2, Papers and Proceedings of the Thirty-Fourth Annual Meeting of the American Finance Association Dallas, Texas December 28-30, 1975 (May, 1976), pp. 489-506

Usually, installment reporting of deferred payment sales for tax purposes will result in deferral of income tax. This note is concerned with the effects of such tax deferral on company profitability and on the flow of funds under varying conditions of sales growth and terms. It is commonly recognized that, with other variables constant, installment sales are growing. However, when sales decline or stabilize following a period of growth, the result is, respectively, the reverse or neutral. Precisely the same pattern was noted in association with tax deferrals achieved by use of accelerated depreciation for tax reporting in company with growing, declining, or stable capital expenditures by a firm.' So far as we know, however, the impact of deferrals resulting from installment reporting upon the present value of company profit flows has never been made explicit. Moreover, profit margins and length of payment terms as well as growth of sales significantly affect the pattern of fund flows associated with deferrals originating from installment reporting. Normative prescriptions are not offered here. Rather, implications of the analysis are left to be read by the wide variety of persons directly concerned in policy contexts, including members of the accounting profession involved in the attempt to reach a consensus with respect to ac-