Asked by Dheandra Armyra on Jun 14, 2024
Verified
A firm's financial managers should always attempt to set a credit policy that will result in no bad debts.
Credit Policy
The guidelines a company follows to determine the creditworthiness of its customers and the terms and conditions of credit it will extend to them.
Bad Debts
Amounts owed to a company that are written off as uncollectible, typically from customers who fail to pay their invoices.
- Become familiar with the effects of credit policy on bad debts and the functioning of accounts receivable (ACP).
Verified Answer
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????? ???????Jun 15, 2024
Final Answer :
False
Explanation :
It is not realistic or feasible for a firm to have no bad debts. Some level of bad debts is inevitable and expected, and a strict credit policy that attempts to eliminate all bad debts may also result in lost sales and revenue opportunities. The goal is to set a credit policy that minimizes the risk of bad debts while also balancing the need for sales growth and customer satisfaction.
Learning Objectives
- Become familiar with the effects of credit policy on bad debts and the functioning of accounts receivable (ACP).