Determining the optimal credit policy is based on a trade-off between the carrying costs of granting credit and the:
A)lost profits from refusing credit.
B)cash flows delayed from granting credit.
C)opportunity cost of the delayed payments.
D)variable costs associated with the delayed payments.
E)present value of uncollected sales.

Question

Quizplus · Accepted Answer

The optimal credit policy balances the carrying costs of granting credit with the lost profits from refusing credit, as extending credit can increase sales and profits, but also involves costs.

Determining the Optimal Credit Policy Is Based on a Trade-Off