Which of the following is not true concerning considerations in setting a credit policy?
A) A firm that supplies a perishable product will tend to offer restrictive credit terms.
B) A firm whose customers are in a high-risk business will tend to offer restrictive credit terms.
C) Lengthening the credit period effectively reduces the price paid by the customer.
D) Small accounts, associated with firms that find it difficult to acquire a line of credit, tend to receive longer credit periods.

Question

Quizplus · Accepted Answer

Lengthening the credit period effectively reduces the customer's cost, as it allows them to delay payment without additional charge, acting like a discount. Firms dealing with perishable goods or high-risk customers indeed tend to offer more restrictive credit terms to minimize the risk of non-payment. However, small accounts, especially those associated with firms that find it difficult to acquire a line of credit, are more likely to face stricter, not more lenient, credit terms due to their higher perceived risk.

Which of the Following Is Not True Concerning Considerations in Setting