Which of the Following Is Not True Concerning Considerations in Setting

question 60

Multiple Choice

Which of the following is not true concerning considerations in setting a credit policy?

• A)A firm that supplies a perishable product will tend to offer restrictive credit terms.
• B)A firm whose customers are in a high-risk business will tend to offer restrictive credit
• Terms.
• C)Lengthening the credit period effectively reduces the price paid by the customer.
• D)Small accounts, associated with firms that find it difficult to acquire a line of credit, tend to
• Receive longer credit periods.
• E)None of the above.

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Definitions:

Contribution Margin Ratio

A calculation that shows what percentage of sales revenue is available to cover the fixed costs of a business after variable costs have been paid.

Fixed Expenses

Costs that remain constant regardless of any change in a company's activity level, such as lease payments, insurance, and property taxes.

Sales

Represents the total income generated by a company from selling goods or services before any expenses are subtracted.

Minimum Required Rate

The lowest return rate that an investment must offer to be considered viable or acceptable.