Which one of the following is the graphical representation of the sum of the carrying costs and the opportunity costs of a credit policy?
A)economic credit function
B)credit analysis
C)credit cost curve
D)accounts receivables aging
E)optimal credit curve

Question

Quizplus · Accepted Answer

The credit cost curve is a graphical representation of the sum of the carrying costs and the opportunity costs of a credit policy. It shows the relationship between the average investment in accounts receivable and the total cost of credit. The curve is usually U-shaped, indicating that there is an optimal credit policy that minimizes total cost. Option A is not correct because the economic credit function refers to the maximum investment in accounts receivable that is economically justified. Option B is not correct because credit analysis is a process of evaluating the creditworthiness of a customer or borrower. Option D is not correct because the accounts receivables aging report shows the breakdown of outstanding receivables by invoice date or aging period. Option E is not correct because the optimal credit curve is a hypothetical curve that shows the optimal trade-off between the cost of carrying inventory and the cost of ordering it.

Which One of the Following Is the Graphical Representation of the Sum