One effect of granting credit to customers is that a ﬁrm may have to increase its borrowing if it
decides to grant credit to its customers.

Name: One effect of granting credit to customers is that a ﬁrm may have to increase its borrowing if it decides to grant credit to its customers.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Granting credit to customers means that the firm is allowing customers to delay payment, which can create a cash flow gap. To cover this gap, the firm may need to borrow money to meet its own financial obligations.

One Effect of Granting Credit to Customers Is That a ﬁRm