Which of the Following Conditions Must Exist for a Firm

question 1

Multiple Choice

Which of the following conditions must exist for a firm to make a change in its existing credit policy?

• A)Days sales outstanding (DSO) must decline if the new policy is implemented.
• B)Bad debts must decrease if the new policy is implemented.
• C)The new policy's net present value (NPV) must be both positive and greater than the existing policy's NPV.
• D)Sales must increase if the new policy is implemented.
• E)The firm's variable costs should decrease if the new policy is implemented.

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Definitions:

Exhaustive

Thorough and comprehensive in approach or scope.

Deficit Spending

The practice of a government spending more money than it receives in revenue, typically funded through borrowing.

Borrowed Funds

Money obtained from external sources, such as banks or financial institutions, to be repaid over time with interest.

Transfer Payments

Payments made by the government to individuals or groups without expecting a good or service in return, often aimed at redistributing income, such as social security benefits and subsidies.