Changes in a firm's collection policy can affect sales, working capital and even additional funds needed.

Question

Quizplus · Accepted Answer

Changes in the collection policy can affect the cash flow of a firm, which in turn can impact its ability to fund operations, invest in new projects or pay off debts on time. If a firm tightens its collection policy, it may lead to lower sales as customers may find it difficult to make timely payments. On the other hand, if a firm relaxes its collection policy, it may boost sales in the short term but increase the risk of bad debt and increase the need for additional funds to finance operations. Therefore, changes in the collection policy should be carefully evaluated to ensure that they align with the firm's overall financial goals and objectives.

Changes in a Firm's Collection Policy Can Affect Sales, Working