What Credit Decision Is Appropriate for a Potential Customer That

question 107

Multiple Choice

What credit decision is appropriate for a potential customer that offers an 80% chance of paying on a $10,000 (present value) sale that has an 80% (present value) cost?

• A) Grant credit since expected profit is $3,200.
• B) Grant credit since expected profit is $800.
• C) Refuse credit since expected profit is zero.
• D) Refuse credit since expected loss is $3,000.

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Definitions:

Phagocytosis

Cells’ ingestion of solid substances, such as other cells, bacteria, bits of necrosed tissue, and foreign particles.

Antibodies

Proteins produced by the immune system to help protect the body from harmful invaders like bacteria and viruses.

Albino

An individual lacking normal pigmentation due to a genetic condition that affects the production of melanin in the skin, hair, and eyes.

Homozygous

State of having identical allelic genes at one or more paired loci in homologous chromosomes.