Which of the following statements correctly reflect the effects of granting credit to customers?
I.Total revenues may increase if both the quantity sold and the price per unit increase when credit is granted.
II.A firm's cash cycle generally increases if credit is granted,all else equal.
III.Both the cost of default and the cost of discounts must be considered before granting credit.
IV.A firm may have to increase its long-term borrowing if it decides to grant credit to its customers.
A)I, II, and III only
B)II, III, and IV only
C)I, III, and IV only
D)I, II, and IV only
E)I, II, III, and IV

Question

Quizplus · Accepted Answer

Granting credit can lead to increased total revenues by potentially increasing both the quantity sold and the price per unit. It typically lengthens the cash cycle, as the time between making a sale and receiving payment is extended. Firms must consider the costs associated with defaults and discounts when offering credit. Additionally, offering credit may require a firm to increase its borrowing to cover the gap between sales and cash receipts, potentially leading to more long-term borrowing.

Which of the Following Statements Correctly Reflect the Effects of Granting