Which of the Following Is Not Considered a Carrying Cost

question 301

Multiple Choice

Which of the following is not considered a carrying cost for the firm when it grants credit?

• A) The required return on receivables.
• B) Losses from bad debts.
• C) The cost of managing credit.
• D) The cost of managing credit collections.
• E) Cost of new analyzing potential new suppliers.

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Definitions:

Average Collection Period (ACP)

The average amount of time it takes for a business to receive payments owed by its customers.

Revenue Forecast

An estimate of the amount of money a company expects to earn over a specific period in the future.

Sustainable Growth Rate

The maximum rate at which a company can grow without needing to increase financial leverage.

Retention Ratio

The proportion of net income that is retained by a company rather than distributed to its shareholders as dividends.