Final answer:
True. Credit approval prior to shipping goods to a customer is necessary to mitigate the risk of non-payment and manage accounts effectively, as credit is based on trust that the buyer will pay in the future.
Step-by-step explanation:
The statement that credit should be approved before goods are shipped to a customer is indeed true. Approving credit is a precautionary measure businesses take to ensure that they will be paid for the goods and services they are providing. This is important because credit is essentially a form of trust that payment will be received in the future. In the context of a credit card, when a customer uses a card to make a purchase, money is immediately transferred from the credit card company's checking account to the seller.
The customer then owes this money to the credit card company, which must be paid back, typically at the end of the month. This mechanism shows that a credit card is indeed a short-term loan. By confirming credit approval before shipment, businesses mitigate the risk of non-payment and manage their accounts more effectively.