Question

When should a firm relax its credit standards?

a. when sales are expected to increase
b. when costs are expected to decrease
c. when costs are expected to increase faster than sales if the standards are not relaxed
d. when the profit contribution from sales is greater than the cost contribution?

Answer 1

A firm should relax its credit standards when costs are expected to increase faster than sales if the standards are not relaxed, also the profit contribution are expected to increase, when costs are expected to increase, so the sales from the contribution is greater than the sales.because it is relaxed.