Question

Which of the following statements is FALSE?A. Firms seek to manage their cash by keeping no more than is needed on hand, because holdingcash has an opportunity cost, namely, the returns that could be earned by investing the money.B. The optimal credit policy for a firm depends on many specific factors, but generally involvestrading off the cost of granting credit, such as the carrying costs of receivables and the possibility of non-payment, against the benefits in terms of increased sales.C. In the five Cs of credit, capacity refers to the customer's willingness to meet credit obligations out of operating cash flows.D. In the five Cs of credit, collateral are the assets pledged by the customer for security in case of default.

Answer 1

C. In the five Cs of credit, capacity refers to the customer's willingness to meet credit obligations out of operating cash flows.

Step-by-step explanation:

The Capacity is not the willingness but rather the ability to repay the loan.