A Firm's Credit Policy and Competition
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Question: What are the four elements of a firm's credit policy? To what extent can firms set their own credit policies as opposed to having to accept policies that are dictated by 'the competition'?
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Solution Summary
This solution is comprised of a 150 word summary of how a firm is able to set up its own credit policy, with the factor of competition also being considered.
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In the OTA's own words in accordance with BM rules:
The four elements of a firm's credit policy are:
1. Cash Discounts: This lowers price. Attracts new customers and reduces DSO.
2. Credit Period: How long to pay? Shorter period reduces DSO and ...
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