A firm changes its credit policy from 2/10, net 30, to 3/10, net 30. The change is meant to meet competition, so no increase in sales is expected. Average accounts receivable will probably decline as a result of this change.

Question

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Offering a larger discount (3% instead of 2%) for early payment is likely to encourage more customers to pay within the discount period, thus reducing the average accounts receivable.

A Firm Changes Its Credit Policy from 2/10, Net 30