The optimal credit amount is determined by:
A)the point which minimizes the total credit cost curve.
B)the point which maximizes the carrying costs associated with granting credit.
C)the point which maximizes opportunity costs associated with granting credit.
D)the point where the additional net cash flow from new customers equals the additional carrying costs of the investment in receivables.
E)Both A and D

Question

Quizplus · Accepted Answer

The optimal credit amount is determined by finding the point that minimizes the total credit cost curve, which is the point at which the additional net cash flow from new customers equals the additional carrying costs of the investment in receivables. Therefore, both option A and D are correct. Option B and C are incorrect as they focus on maximizing carrying costs or opportunity costs, which may not lead to the optimal credit amount.

The Optimal Credit Amount Is Determined By