{"id":57475,"date":"2024-04-16T01:02:39","date_gmt":"2024-04-16T01:02:39","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=57475"},"modified":"2024-04-16T01:02:39","modified_gmt":"2024-04-16T01:02:39","slug":"credit-policy-of-a-firm-should-involve-a-trade-off-between-increased","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/credit-policy-of-a-firm-should-involve-a-trade-off-between-increased\/","title":{"rendered":"Credit Policy of a firm should involve a trade-off between increased:"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a97debbe196f\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"false\">\r\n                    Sales and Increased Profit                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"true\">\r\n                    Profit and Increased Costs of Receivables                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"false\">\r\n                    Sales and Cost of goods sold                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    None of the above                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is: <strong>B. Profit and Increased Costs of Receivables<\/strong><\/p>\n<p>A firm&#8217;s credit policy is a set of guidelines that determine how a company extends credit to its customers. The goal of <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div> a credit policy is to maximize profits while minimizing the risk of non-payment.<\/p>\n<p>There is a trade-off between increased sales and increased costs of receivables. When a company extends more credit, it will likely see an increase in sales. However, it will also have to carry more accounts receivable, which can lead to increased costs. These costs include the cost of carrying the receivables, such as the opportunity cost of the funds that could be invested elsewhere, and the cost of bad debts, which are accounts that are never paid.<\/p>\n<p>The optimal credit policy is the one that maximizes profits. This will vary depending on the specific circumstances <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n                    <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> of the company, such as its industry, its customer base, and its financial situation.<\/p>\n<p>Here is a brief explanation of each option:<\/p>\n<ul>\n<li><strong>A. Sales and Increased Profit<\/strong><\/li>\n<\/ul>\n<p>This is not always the case. When a company extends more credit, it may see an increase in sales, but it will also have to carry more accounts receivable, which can lead to increased costs. These costs include the cost of carrying the receivables, such as the opportunity cost of the funds that could be invested elsewhere, and the cost of bad debts, which are accounts that are never paid.<\/p>\n<ul>\n<li><strong>C. Sales and Cost of goods sold<\/strong><\/li>\n<\/ul>\n<p>The cost of goods sold is not affected by the credit policy. The cost of goods sold is the cost of the goods that a company sells. It is determined by the cost of the materials, labor, and overhead that go into producing the goods.<\/p>\n<ul>\n<li><strong>D. None of the above<\/strong><\/li>\n<\/ul>\n<p>This is not the correct answer. The correct answer is <strong>B. Profit and Increased Costs of Receivables<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Join Our Telegram Channel Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Credit Policy of a firm should involve a trade-off between increased:<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/credit-policy-of-a-firm-should-involve-a-trade-off-between-increased\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" 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