The Accounts Receivable Approach to Credit Policy Supports the Theory

question 49

Multiple Choice

The accounts receivable approach to credit policy supports the theory that:

• A)a firm's risk of offering credit to a new customer is limited to the variable cost of the sold items.
• B)the best credit policy is an all-cash policy.
• C)the cost of offering credit to a new customer is the same as the cost of offering credit to an existing customer.
• D)foregoing cash discounts is a method of obtaining inexpensive short-term financing.
• E)the default risk of a credit policy is the same as the default risk under an all cash-policy if your customers remain the same.