If the firm's cash discount period is decreased or cancelled, the sales volume can be expected to ________, the bad debt expenses can be expected to ________, and the profit per unit can be expected to ________.

Question

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Decreasing or cancelling the cash discount period would likely decrease sales volume because customers may not feel as incentivized to pay quickly. However, bad debt expenses may increase because customers may take longer to pay or may default on their payments altogether. Profit per unit may increase because the firm is not offering a discount on the sale, but the overall decrease in sales volume and increase in bad debt expenses may offset this. Choice C reflects these expected outcomes.

If the Firm's Cash Discount Period Is Decreased or Cancelled