When a firm initiates or increases a cash discount, sales are expected to____________ , the investment inaccounts receivable is expected to _____________, the bad debt expense is expected to____________ , and theprofit per unit is expected to____________ .

Question

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When a firm offers or increases a cash discount, it incentivizes customers to pay earlier, leading to increased sales. This reduces the investment in accounts receivable as customers pay faster. Bad debt expense is likely to decrease as more customers pay on time. However, the profit per unit may decrease due to the discount offered.

When a Firm Initiates or Increases a Cash Discount, Sales