Businesses are often required to extend credit as a means of increasing sales.Before granting credit,businesses are encouraged to take any of the following steps EXCEPT
A)take advantage of the available public records of credit history,proposals,and bankruptcies.
B)search both the corporate name of the debtor and its directors and officers to determine if the company is merely a fresh start after a bankrupt business.
C)not request personal guarantees of the principals because the company's agreement to pay will always suffice.
D)take security in the goods provided.
E)set up a control system to monitor lien periods for building supplies and limitation periods.

Question

Quizplus · Accepted Answer

The other steps mentioned (A, B, D, and E) are all recommended actions for businesses to take before granting credit to a customer. However, not requesting personal guarantees of the principals would be a risky decision for the business because it would leave them with no further recourse if the company is unable to pay its debts. Personal guarantees provide an additional layer of security for the business, as the guarantor is legally responsible for the debt if the company defaults.

Businesses Are Often Required to Extend Credit as a Means