Changes in a firm's collection policy can affect sales, working capital, and profits.

Question

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If a firm tightens its collection policy, it may dissuade customers from buying on credit, which could negatively impact sales. However, a good collection policy can improve cash flow and increase the availability of working capital, which can boost profits. Conversely, a loose collection policy can lead to delayed payments and cash flow problems, which can adversely affect all three areas.

Changes in a Firm's Collection Policy Can Affect Sales, Working