The credit decision usually includes riskier customers. The credit decision should adjust for this by:
A) determining the probability that customers will pay and reducing the expected cash flow.
B) discounting the net cash flows at a lower discount rate.
C) discounting the cash inflow at a higher discount rate.
D) delaying collections on these customers.
E) speeding up deliveries to riskier customers.

Question

Quizplus · Accepted Answer

Adjusting the expected cash flow by determining the probability that riskier customers will pay is the best choice. This allows for a more accurate assessment of the potential credit risk and helps mitigate potential losses. Discounting the net cash flows at a lower or higher rate, delaying collections, or speeding up deliveries may not adequately address the risk associated with these customers.

The Credit Decision Usually Includes Riskier Customers