Setting high credit standards reduces the likelihood a firm will have problems with customers who pay late (or not at all).

Question

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When a company sets high credit standards, it is more likely to attract customers who have a good credit history and are committed to paying their bills on time. This reduces the likelihood of late payments or non-payment issues, which can negatively impact the firm's cash flow and profitability. Therefore, setting high credit standards can help companies mitigate credit risk and improve their financial performance.

Setting High Credit Standards Reduces the Likelihood a Firm Will