If a company did not extend credit to customers:
A) gross revenue would rise.
B) costs would rise but so would its revenue.
C) costs would fall but so would its revenue.
D) gross profit would rise.

Question

Quizplus · Accepted Answer

If a company did not extend credit to customers, it would need to have all of its customers pay upfront, which would result in a decrease in sales revenue due to customers who cannot or will not pay upfront. However, the cost of managing credit and collections would also decrease, resulting in an overall decrease in costs. Therefore, both revenue and costs would decrease, and gross profit would not necessarily rise. The option that reflects this is C.

If a Company Did Not Extend Credit to Customers