A supplier who changes its trade credit from 3/10 n/30 to 4/15 n/40 is likely to find:
A) its accounts receivable decrease.
B) its risk of bad debts reduces.
C) its accounts receivable increase.
D) a decrease in sales.

Question

Quizplus · Accepted Answer

Changing the trade credit to a longer period of time (from 30 days to 40 days) with a higher discount rate (from 3% to 4%) will likely encourage customers to delay their payments, resulting in an increase in accounts receivable. This would not necessarily lead to a decrease in sales or a reduction in the risk of bad debts.

A Supplier Who Changes Its Trade Credit from 3/10 N/30