A local lawn care business is considering changing their credit policy for customers. Their accountant gathered the following information to help management decide. The lawn care business would like to switch to an all-cash sales system since they are collecting only 72% of their credit sales. The management team is not unanimously on board with the idea of making this change. Which of the following reasons is the most likely reason the management team is not on the same page?

Question

A local lawn care business is considering changing their credit policy for customers. Their accountant gathered the following information to help management decide.  The lawn care business would like to switch to an all-cash sales system since they are collecting only 72% of their credit sales. The management team is not unanimously on board with the idea of making this change. Which of the following reasons is the most likely reason the management team is not on the same page?

Quizplus · Accepted Answer

This question requires familiarity with financial performance measures including how various changes in company policies can impact an organization's ability to attract or retain customers. Choice B is correct because having a more stringent cash-only sale policy may drive existing customers to take their business elsewhere so they have more generous terms. The remaining choices are incorrect because they are not likely reasons that management would disagree with this potential new policy. The incorrect choices all represent valid reasons a competitor might attract customers, but none are due to the potential cash-only policy.

A Local Lawn Care Business Is Considering Changing Their Credit