In general, a firm's credit policy should grant the credit whenever the expected:

Question

Quizplus · Accepted Answer

The credit policy of a firm should aim to maximize profit, which means that the profit from granting credit should exceed zero. Option A is not suitable as the cost of the product is irrelevant; it is the profit that matters. Option C is incorrect as it compares profit to the price of the product, which may not be related. Option D factors in the probability of loss but does not take into account the potential profit from granting credit.

In General, a Firm's Credit Policy Should Grant the Credit