The optimal credit amount is determined by:
A) the point which minimizes the total credit cost curve.
B) the point which maximizes the carrying costs associated with granting credit.
C) the point which maximizes opportunity costs associated with granting credit.
D) the point where the additional net cash flow from new customers equals the additional carrying costs of the investment in receivables.
E) Both the point which minimizes the total credit cost curve; and the point where the additional net cash flow from new customers equals the additional carrying costs of the investment in receivables.

Question

Quizplus · Accepted Answer

The optimal credit amount is determined by both the point which minimizes the total credit cost curve, and the point where the additional net cash flow from new customers equals the additional carrying costs of the investment in receivables. These two factors need to be considered together to find the optimal credit amount that balances the costs and benefits of granting credit.

The Optimal Credit Amount Is Determined By