In general, the larger the portion of a firm's sales that are on credit, the
A)lower will be the firm's need to borrow.
B)higher will be the firm's need to borrow.
C)more rapidly credit sales will be paid off.
D)more the firm can buy raw materials on credit.

Question

Quizplus · Accepted Answer

If a firm is making more sales on credit, it means that they are not receiving cash up front and therefore have a greater need for working capital. In order to meet this need, the firm may need to borrow money. Therefore, the answer is B - the higher will be the firm's need to borrow.

In General, the Larger the Portion of a Firm's Sales