What are some of the costs a business incurs in making credit sales to customers? What are some of the benefits of making credit sales?
What will be an ideal response?
Costs include the cost of handling the account (posting, billing, collecting) as well as the cost of uncollectible accounts. Further, there is an implicit interest cost associated with credit sales because cash is not immediately available for other needs. Benefits include making sales that a business would not make if cash payment was required at the time of the sale and increasing the business's net income.
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