Should Credit Be Granted to a Customer Wishing to Purchase

question 33

Multiple Choice

Should credit be granted to a customer wishing to purchase a $2,000 item that has been marked up 50% over cost if the probability of collection is only 65%? Assume all cash flows are discounted to present value.

• A) No; the expected loss is $33.33.
• B) No; the expected loss is $150.00.
• C) Yes; the expected profit is $33.33.
• D)Yes; the expected profit is $150.00.

---

Definitions:

Net New Bonds

The total value of newly issued bonds minus the bonds that have matured or been bought back by the issuer within a specific period.

Operating Cash Flow

Represents the amount of cash generated by a company's regular business operations.

Normal Business Activities

The everyday tasks and operations conducted by a company to generate profits and maintain viability, such as sales, production, and administration.