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

Offering liberal credit to customers creates a delay in the receipt of cash that the firm needs to meet its financial obligations. This delay can lead to cash flow issues and financial instability for the company. It can also increase the risk of bad debt if customers fail to make payments on time, which can further worsen the company's financial position. Therefore, offering liberal credit needs to be carefully balanced against the potential benefits of increased sales and customer loyalty.

One Drawback of Offering Liberal Credit to Customers Is That