What Is the Primary Purpose of Credit Analysis

question 14

Multiple Choice

What is the primary purpose of credit analysis?

• A)determine the optimal credit period
• B)establish the effectiveness of granting a cash discount
• C)determine the optimal discount period, if any
• D)access the frequency and amount of sales by customer
• E)evaluate whether or not a customer will pay

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Definitions:

Double Counting

The mistake of counting the same item or transaction more than once when calculating economic indicators, leading to inaccuracies.

Real GDP

Gross Domestic Product adjusted for inflation, providing a more accurate measure of the economic value of goods and services produced over a specific period.

Nominal GDP

The market value of all final goods and services produced within a country in a given period, measured using current prices without adjustment for inflation.

Price Inflation

The pace at which the overall price level of goods and services increases, leading to a decline in purchasing power.