Firms extending credit to customers should
A)strive for zero uncollectible accounts to eliminate the need for establishing a bad debt expense and maintaining an allowance for uncollectible accounts.
B)grant credit indiscriminately otherwise the firm may be charged with discrimination in the granting of credit and could be found to be in violation of Federal laws.
C)grant credit to a given group of customers whenever the amount collected from the credit sales to that group exceeds the cost of goods sold and the other costs of serving that group.
D)should ignore collection efforts aimed at those customers who have not paid their bills because the cost of staffing and maintaining a collection department are never cost effective.
E)none of the above.

Question

Quizplus · Accepted Answer

Firms extending credit to customers should aim to generate profits by granting credit to a given group of customers whenever the amount collected from the credit sales to that group exceeds the cost of goods sold and the other costs of serving that group. This approach ensures that only profitable credit sales are made and helps manage the risks associated with extending credit. The options A, B, D are incorrect because it's not feasible to achieve zero uncollectible accounts, grant credit indiscriminately, or ignore collection efforts without incurring significant costs and risks.

Firms Extending Credit to Customers Should