Question

Which of the following statements about the tradeos of extending credit is not correct?

A. Extending credit to at least some customers is necessary in a compeve market to avoid losing sales to competors.

B. Even if a company were to collect in full from customers, there would be other addional costs introduced by extending credit to customers.

C. Even though addional costs are incurred if credit is extended, a company expects that the addional revenue will be more than sufficient to offset the addional costs.

D. Even if there are no bad debts from credit sales, the delayed receipt of cash will always increase addional costs beyond the increased revenue from the credit sales.

Answer 1

The statement that is not correct is D. Even if there are no bad debts from credit sales, the delayed receipt of cash will always increase additional costs beyond the increased revenue from the credit sales.

Step-by-step explanation:

The answer that is not correct is D. Even if there are no bad debts from credit sales, the delayed receipt of cash will always increase additional costs beyond the increased revenue from the credit sales.

This statement is not accurate because if there are no bad debts from credit sales, then the delayed receipt of cash will not necessarily increase additional costs beyond the increased revenue. The delayed receipt of cash may have some associated costs, such as the time value of money, but these costs may be offset by the increased revenue from the credit sales.