Determining the Optimal Credit Policy Is Based on a Trade-Off

question 38

Multiple Choice

Determining the optimal credit policy is based on a trade-off between the carrying costs of granting credit and the:

• A)lost profits from refusing credit.
• B)cash flows delayed from granting credit.
• C)opportunity cost of the delayed payments.
• D)variable costs associated with the delayed payments.
• E)present value of uncollected sales.

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Definitions:

Unemployment

A situation where individuals who are capable of working and are actively seeking employment are unable to find a job.

Aggregate Demand

Totality of demand for all goods and services in an economy, pegged at a given broad price level for a particular timeframe.

Taxes

Compulsory financial charges or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Unemployment

A situation where individuals who are capable of working and are seeking work are unable to find employment.