Which of the Following Is a Disadvantage of Selling on Credit

question 126

Multiple Choice

Which of the following is a disadvantage of selling on credit?

• A) Sales can be made to a more diverse group of customers.
• B) Profits are increased by making sales to a wider range of customers.
• C) Some customers do not pay, creating an expense.
• D) Prices must be reduced when selling on credit.

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Definitions:

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been deducted from total revenue.

Equity Multiplier

A financial leverage ratio that measures the portion of a company’s assets that is financed by stockholders' equity.

Total Liabilities

The combined amount of a company's short-term and long-term debts, representing claims against the company's assets by outsiders.

Stockholders' Equity

The value remaining in a company after liabilities are subtracted from assets, representing what is owned by the shareholders.