Suppose that two firms are identical in all aspects except for their credit policies. The days sales outstanding (DSO) of Firm A is 20 days and the days sales outstanding (DSO) of Firm B is 30 days. Which of the following statements about the firms is correct?
A. Firm A takes more time to collect its receivables than Firm B.
B. Firm A has tighter credit terms than Firm B.
C. Firm A has a weaker collection team than Firm B.
D. Firm A provides less discount to its customers to pay its bills early than Firm B.
E. Firm A has weaker receivables monitoring system than Firm B.
Answer: B
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