Which of the Following Is One Drawback of Offering Credit

question 21

Multiple Choice

Which of the following is one drawback of offering credit customers more time to pay?

• A) It delays the receipt of the cash the firm needs to pay its obligations.
• B) It causes sales revenue to be incorrectly measured under the accrual method.
• C) It increases the cost of credit to customers.
• D) It increases the firm's taxable income.

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Definitions:

Damages

A monetary compensation awarded by a court to indemnify someone who has suffered loss or injury due to the unlawful act or negligence of another.

Privity of Contract

The rule that only the individuals or entities who are parties to a contract can have rights or duties imposed by the contract itself.

Statutory Assignment

The transfer of rights or benefits from one party to another in accordance with specific statutes or laws.

Equitable Assignment

The transfer of rights or benefits from one party to another, recognized by equity and intended to be binding, often used in absence of formal legal assignment.