Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

Which of the following is considered a poor reason for a company to extend credit to its customers?

To build long-term relationships with reliable customers

To increase sales to customers who cannot pay immediately

To remain competitive with other businesses in the industry

To accommodate seasonal fluctuations in customer cash flow

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Verified step by step guidance

Understand the concept of extending credit: Companies often extend credit to customers to allow them to purchase goods or services without immediate payment. This can be beneficial for both the company and the customer under certain circumstances.

Analyze the reasons provided: Review each option to determine whether it aligns with sound business practices or could be considered a poor reason for extending credit.

Evaluate 'To build long-term relationships with reliable customers': This is generally a good reason for extending credit, as it fosters trust and loyalty with customers who are dependable.

Evaluate 'To remain competitive with other businesses in the industry': This is also a valid reason, as offering credit can help a company stay competitive in markets where credit terms are standard practice.

Evaluate 'To increase sales to customers who cannot pay immediately': This is considered a poor reason because extending credit to customers who are unlikely to pay can lead to bad debts and financial losses for the company.