Asked by Adrienne Hilton on Jul 26, 2024

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Which of the following is considered a carrying cost associated with granting credit?

A) A firm's required return on payables.
B) A firm's gains from bad debts.
C) A firm's cost of managing credit.
D) A firm's cost of managing payments to suppliers.
E) A firm's cost of equity.

Carrying Cost

The total cost of holding inventory, including storage, maintenance, and insurance.

Managing Credit

The process of monitoring and controlling a person's or business's credit usage and payments to ensure financial stability and minimize risk of default.

Required Return

The minimum return an investor expects to achieve by investing in a particular asset, considering its risk level.

  • Acquire knowledge about the vital role and practices of managing receivables, and their consequences on cash flow.
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Casey PapabearJul 27, 2024
Final Answer :
C
Explanation :
Carrying costs associated with granting credit include the costs involved in managing and administering the credit process. This encompasses the expenses related to assessing creditworthiness, maintaining accounts receivable, and collecting payments. Therefore, a firm's cost of managing credit is a direct carrying cost of granting credit.