Liberal credit policy creates a problem of bad debts. - Secretarial Practice

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MCQ
True or False

Liberal credit policy creates a problem of bad debts.

Options

  • True

  • False

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Solution

This statement is True.

Explanation:

If the firm does not get a credit facility for purchases but adopts a liberal credit policy for its sales, it requires more working capital. On the other hand, if credit terms of purchases are favourable and terms of credit sales are less liberal, then the cash requirement will be less.

Concept: Capital Requirements
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Chapter 1: Introduction To Corporate Finance - Exercises [Page 12]

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Balbharati Secretarial Practice 12th Standard HSC Maharashtra State Board
Chapter 1 Introduction To Corporate Finance
Exercises | Q 1. D) 9. | Page 12

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