Final answer:
An increasing collection period for accounts receivable typically suggests that the firm's credit policy may be too lenient, as customers are taking longer to make payments. This could be due to overly generous credit terms or ineffective enforcement of credit policies.
Step-by-step explanation:
When considering what an increasing collection period for accounts receivable suggests about a firm's credit policy, it leads us to the implication that the credit policy may be too lenient. An extended collection period indicates that a company is taking longer to collect payments from its customers. This could mean that the firm is offering credit terms that are too generous or that it is not enforcing its credit terms effectively, leading to slower payment times and potential cash flow issues.
Option (c) 'The credit policy may be too lenient' would therefore be the most appropriate answer given the context. A restrictive credit policy would typically result in a quicker collection period, not an extended one. Also, losing qualified customers would more so relate to the firm being too restrictive rather than too lenient.