Final answer:
The false statement is that the amount at risk when extending credit is just the price the customer pays; in reality, it includes other costs as well. The other statements regarding credit policies, cash flow, cash discounts, markups, and carrying costs in relation to credit are generally true.
Step-by-step explanation:
The false statement among the options provided is: d. Whenever credit is extended to a new customer who would not otherwise pay cash, the amount the seller has at risk is the price the customer pays. This statement is incorrect because the amount at risk for the seller is not just the price the customer pays, but also includes the potential cost of any goods sold, the credit expenses, and the opportunity cost of the capital that could have been employed elsewhere.
Statement a. By extending credit, a firm typically increases its cash flow through increased gross profits is true, as credit sales can lead to higher total sales and consequently to increased gross profits. Statement b. A cash discount is typically intended to be an incentive to pay early is also true, as offering a discount for early payment encourages customers to settle their invoices sooner, which improves the firm's cash flow. The statement c. All else the same, firms with higher markups will tend to have more flexible credit terms is generally true because firms with higher markups can afford to take on more risk associated with extending credit. Lastly, statement e. The carrying costs associated with granting credit will increase as credit policies are relaxed is true, as more lenient credit terms can lead to higher risks of non-payment and increased costs of managing receivables.