The optimal credit policy will do which one of the following?
A)Maximize sales
B)Minimize bad debts
C)Maximize units sold
D)Minimize the total costs of granting credit
E)Minimize carrying costs

Question

Quizplus · Accepted Answer

The optimal credit policy should aim to minimize the total costs of granting credit, taking into account both the costs associated with the extension of credit (such as bad debts and collection costs) and the benefits associated with increased sales and customer goodwill. While maximizing sales and units sold are important objectives for many businesses, these should be secondary to the ultimate goal of minimizing costs and maximizing profitability. Minimizing bad debts and carrying costs are also important considerations, but again, these are part of the overall cost minimization objective.

The Optimal Credit Policy Will Do Which One of the Following