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    Effects of extending customer credit

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    You have a sole-proprietorship merchandising business dealing with photography equipment. The business was established three years ago, and it has had an average annual turnover of $50,000. However, over the last six months, the monthly sales have fallen considerably. To reverse this downward slide, you are considering selling the products on a credit basis of 15 days to all your regular customers. There are approximately 25-30 such customers. In turn, you also plan to ask your vendors to increase the credit period from 15 days to 25 days for all payments. Is buying or selling the products on credit basis a good decision? Explain.

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    Yes, it can be a good decision as the sales are going down and by giving extra benefit to the customer there can be increase in sales. This policy is also known as credit policy. A firm following a liberal credit policy sells on credit to customers on liberal terms and standards. Credit is granted even for longer periods to those ...

    Solution Summary

    Response discusses the effects of extending customer credit