The Optimal Credit Policy

question 43

Multiple Choice

The optimal credit policy:

• A)is the policy that eliminates all potential bad debts
• B)is the one which offers credit to the largest number of customers
• C)minimises the carrying costs associated with granting credit
• D)is the policy that produces the largest amount of sales for a firm
• E)minimises the total cost of granting credit

---

Definitions:

Lead Time

The total time that elapses between the initiation and completion of a process, such as the period from placing an order to delivery of a product.

Re-Order Point

The reorder point is the level of inventory that triggers an action to replenish that particular inventory stock, ensuring a seamless operation without stockouts.

Demand

The total quantity of a good or service that consumers are willing and able to purchase at a given price level at a given time.

Standard Deviation

A measure that indicates the amount of variation or dispersion of a set of values from the mean.