When a firm's credit standards are relaxed ________.
A)its sales are expected to decrease with a corresponding increase in costs
B)its costs are expected to decrease with a corresponding decrease in sales
C)its costs are expected to increase faster than sales if the standards are not relaxed
D)its profit contribution from sales will be greater than the cost contribution

Question

Quizplus · Accepted Answer

When a firm's credit standards are relaxed, it typically leads to an increase in sales as more customers are able to purchase on credit. The profit contribution from these additional sales is expected to be greater than the cost contribution, assuming the increase in sales outweighs the potential increase in bad debts or credit-related costs.

When a Firm's Credit Standards Are Relaxed ________