A Customer Has Ordered Goods with a Value of $2000

question 29

Multiple Choice

A customer has ordered goods with a value of $2000. The production cost is $1800. Under what conditions should you extend credit if there is no possibility of repeat orders?

• A) If the probability of payment exceeds 0.67
• B) If the probability of payment exceeds 0.75
• C) If the probability of payment exceeds 0.80
• D) If the probability of payment exceeds 0.90 p(2000 - 1800) - (1 - p)(1800) = 0; p = 0.90

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Definitions:

Safe Payments

Payments that are secure and protected against fraud or theft, often through encryption and authentication measures.

Capital Deficit Balances

Situations where a company's total capital is less than zero, indicating that its liabilities exceed its assets.

Recorded Capital Account

An account on a company's balance sheet that represents the shareholders' equity invested in the business, either by contributing capital or retaining earnings.

Distribution

The process of allocating assets, such as cash dividends or stock shares, to shareholders as part of the earnings generated by a company.