One drawback of offering liberal credit to customers is that it can:
A) delay the sales to a future period.
B) increase the cost of credit to customers.
C) delay the receipt of cash that the firm needs to meet its financial obligations.
D) decrease sales by the extension of credit and cause a loss to the company.

Question

Quizplus · Accepted Answer

When a firm offers liberal credit to customers, it may delay the receipt of cash that the firm needs to meet its financial obligations. This can create a cash flow problem for the firm, resulting in difficulty in paying its own debts and expenses in a timely manner.

One Drawback of Offering Liberal Credit to Customers Is That