Final answer:
The standards for determining credit extension are referred to as a credit policy, which is answer (c) for the multiple-choice question. This policy includes evaluating customer creditworthiness and setting credit terms for business transactions. The correct answer is c. credit policy.
Step-by-step explanation:
The standards set to determine the amount and nature of credit to extend to customers is known as a credit policy. The correct answer to the multiple-choice question is option (c) credit policy.
A credit policy includes criteria for evaluating a customer's creditworthiness, terms and conditions of credit sales, and procedures for the collection of outstanding receivables.
The terms of sale typically refer to specific conditions such as payment due dates and discounts for early payment, a collection policy is concerned with the methods used to collect overdue accounts, and a credit agreement is an individual contract between the lender and the borrower.
Having a clear credit policy is essential for businesses to manage risk and maintain healthy cash flows. The correct answer is c. credit policy.