What Should a Firm Do After Establishing a Credit Policy

question 51

Multiple Choice

What should a firm do after establishing a credit policy?

• A)Decide what should be done for those customers who do not pay their accounts on time.
• B)Monitor its accounts receivable to analyze whether its credit policy is effective.
• C)Decide on the length of the period before payment must be made.
• D)Determine what percent of monthly sales are collected in the month after that sale.
• E)Encourage as many customers as possible to use credit.

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Definitions:

Expected Value

In statistics and probability theory, the average result of a random variable, computed as the weighted average of all possible values.

Expected Utility

A theory in economics that assesses options under uncertainty, predicting choices that maximize utility based on expected outcomes.

Marginal Utility

The added satisfaction that a consumer gains from consuming one more unit of a good or service.

Risk-averse

A characteristic of individuals or entities that prefer to avoid risk in investment choices, opting for safer, less uncertain options.