The absence of bad debts is an indicator that the credit policy may be too strict, and can result in the loss of profits.

Question

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If a company's credit policy is too strict, they may reject potential customers who could bring in profits but have a slightly higher risk of defaulting on their debts. By only accepting customers with impeccable credit histories, the company may be losing out on potential revenue. However, this does not mean that a company should accept every customer and have a lenient credit policy, as that can lead to a high level of bad debts and financial losses. It's all about finding the right balance.

The Absence of Bad Debts Is an Indicator That the Credit