Which of the following characteristics are most associated with a firm that adopts a liberal credit policy?
A) Mostly one-time customers and excess capacity
B) Low carrying costs and full production
C) Low carrying costs and high variable costs
D) Low variable costs and predominately repeat customers
E) Excess capacity and high variable costs

Question

Quizplus · Accepted Answer

A liberal credit policy is one in which a company extends credit to its customers that is relatively easy to obtain and allows for longer payment periods. This type of policy is most commonly associated with predominately repeat customers, as they have already established a relationship with the company and are more likely to have a reliable payment history. Additionally, a liberal credit policy is typically implemented when a company has low variable costs, as this allows them to absorb the risk of late or non-payment without significantly impacting their profitability.

Which of the Following Characteristics Are Most Associated with a Firm