Lengthening the credit period is likely to result in all except which of the following?
A) Higher sales
B) More cash sales
C) Larger investment in receivables
D) Longer average collection period

Question

Quizplus · Accepted Answer

Lengthening the credit period means offering customers more time to pay for their purchases, which may result in higher sales (A) since customers are more willing to buy now that they have more time to pay. However, this may also lead to a larger investment in receivables (C) since the company has to wait longer to receive payment. Additionally, a longer credit period may lead to a longer average collection period (D) since customers are taking longer to pay. However, lengthening the credit period is unlikely to result in more cash sales (B) since customers are still buying on credit and not paying cash.

Lengthening the Credit Period Is Likely to Result in All