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 change in the level of sales.

Question

Quizplus · Accepted Answer

When analyzing the cost benefit of switching to a 30-day credit policy, the change in sales level should be considered because it will impact the firm's cash flow and revenue. A decrease in sales due to customers' inability to pay within 30 days may outweigh the benefits of offering credit. On the other hand, an increase in sales may justify the cost of offering credit.

Taylor and Swanson Currently Sells on a Cash Basis Only