Which one of the following is the graphical representation of the sum of the carrying costs and the opportunity costs of a credit policy?
A)Accounts receivable aging
B)Economic credit function
C)Optimal credit curve
D)Credit analysis
E)Credit cost curve

Question

Quizplus · Accepted Answer

The credit cost curve is the graphical representation of the sum of carrying costs and opportunity costs of a credit policy. It shows the relationship between the cost of carrying accounts receivable and the cost of forgoing the cash discount. Choice A (Accounts receivable aging) is a report that lists all unpaid customer accounts by their length of time outstanding. Choice B (Economic credit function) is a calculation that determines the optimal amount of credit to extend to customers based on the cost of credit and the effect on sales. Choice C (Optimal credit curve) is a theoretical curve that shows the relationship between credit terms and the level of accounts receivable that maximizes profits. Choice D (Credit analysis) refers to the process of evaluating a customer's creditworthiness before extending credit.

Which One of the Following Is the Graphical Representation of the Sum