If a firm's credit period is increased, the sales volume can be expected to ________, the investment in accounts receivable can be expected to ________, and the bad debt expenses can be expected to ________.
A) increase; decrease; decrease
B) increase; increase; decrease
C) increase; increase; increase
D) decrease; decrease; decrease

Question

Quizplus · Accepted Answer

Increasing a firm's credit period typically leads to an increase in sales volume as more customers are attracted by the more lenient payment terms. This also results in an increase in investment in accounts receivable because the firm has to wait longer to receive payments. Additionally, with longer credit periods, the risk of non-payment or late payment increases, leading to an increase in bad debt expenses.

If a Firm's Credit Period Is Increased, the Sales Volume