The Accounts Receivable Approach Supports the Theory That

question 147

Multiple Choice

The accounts receivable approach supports the theory that:

• A) Your risk of offering credit to a new customer is limited to your cost of the items sold.
• B) The best credit policy is an all-cash policy.
• C) The cost of offering credit to a new customer is the same as the cost of offering credit to an existing customer.
• D) Foregoing cash discounts is a method of obtaining inexpensive short-term financing.
• E) The default risk of a credit policy is the same as the default risk under an all cash-policy if your customers remain the same.

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Definitions:

Technology A

Refers to a generic term used to describe a specific technology, typically when comparing it to another technology (e.g., Technology B).

Break Even

The point at which total costs and total revenues are equal, resulting in no profit or loss for a business.

Fixed Costs

Expenses that remain constant regardless of the amount of goods produced or sold, including items like lease payments, wages, and insurance costs.

Marginal Cost

The increase in cost resulting from the production of one additional unit of a product or service.