Asked by Kimberly Tieman on Jul 05, 2024
Verified
A ______________ factor of credit policy effects occurs when a firm which institutes a credit policy finds it must bear the cost of some of its customers defaulting on their obligations.
A) Cost.
B) Cost of debt.
C) Revenue.
D) Probability of nonpayment.
E) Cash discount.
Credit Policy Effects
Refers to the outcomes or changes in business performance and financial health resulting from adjustments to a company's credit terms and conditions offered to customers.
Cost Factor
A variable, condition, or aspect that determines the cost of an operation or activity, often expressed as a multiplier or percentage.
Probability of Nonpayment
The likelihood that a debtor will default on their loan obligations, not repaying the principal or interest.
- Acquire knowledge about the consequences that credit policy modifications have on the behavior of customer payments and the finances of the firm.
Verified Answer
RH
Rosalio HernandezJul 07, 2024
Final Answer :
D
Explanation :
The correct term is "Probability of nonpayment," which refers to the risk associated with customers not fulfilling their payment obligations under the credit policy. This is a direct cost to the firm as it may not recover the full value of the credit extended.
Learning Objectives
- Acquire knowledge about the consequences that credit policy modifications have on the behavior of customer payments and the finances of the firm.