Asked by Silvia Gopalakrishnan on Jul 12, 2024
Verified
Relaxation of credit policy results in:
A) an increase in credit sales.
B) a decrease in credit expenses.
C) a decrease in investment in receivables.
D) b and c
E) All of the above
Credit Policy
Guidelines that govern a company's extension of credit to customers, determining who is eligible and on what terms.
Credit Sales
Sales made by a business on credit, allowing customers to pay at a later date.
Receivables
Money owed to a company by its customers for goods or services that have been delivered or sold but not yet paid for.
- Interpret the effects of relaxing or tightening credit policies and collection procedures on financial indicators.
Verified Answer
HP
Haley PierceJul 14, 2024
Final Answer :
A
Explanation :
Relaxation of credit policy typically leads to an increase in credit sales as more customers are able to buy on credit due to less stringent credit terms. This does not necessarily mean a decrease in credit expenses or a decrease in investment in receivables; in fact, both might increase due to the higher volume of credit sales and the need to manage and collect them.
Learning Objectives
- Interpret the effects of relaxing or tightening credit policies and collection procedures on financial indicators.