Asked by Zarria Turner on Jul 25, 2024
Verified
One effect of granting credit to customers is that both the cost of default and the cost of discounts must be considered before granting credit.
Cost Of Default
The expenses and financial losses incurred when a borrower fails to make a loan payment on time.
Cost Of Discounts
The reduction in revenue a company faces when it offers products or services at a reduced price.
- Learn about the consequences of extending credit on the aggregate revenue, cost profile, and liquidity cycle of a firm.
Verified Answer
QC
Queen CharlesJul 30, 2024
Final Answer :
True
Explanation :
Granting credit to customers introduces the risk of default, where customers may not pay their debts, and often involves offering discounts for early payment, both of which affect the financial considerations of the credit policy.
Learning Objectives
- Learn about the consequences of extending credit on the aggregate revenue, cost profile, and liquidity cycle of a firm.