Taylor and Swanson currently sells on a cash basis only. The firm is considering switching to a 30-day credit policy. When analyzing the cost benefit of this switching policy, the firm should consider the rate of default.

Question

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When considering switching to a 30-day credit policy, a firm must account for the possibility of default, as not all customers may pay their dues within the credit period, impacting the firm's cash flow and profitability.

Taylor and Swanson Currently Sells on a Cash Basis Only