Question

Which change to its credit policy should a firm consider if it is experiencing declining sales...

Which change to its credit policy should a firm consider if it is experiencing declining sales in a competitive environment where the competition offers significantly more favorable credit terms?

A. Offering discounts for early invoice payments

B. Requiring cash payment at point of sale

C. Lowering prices of goods and services

D. Reducing customer credit limits

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Homework Answers

Answer #1

In this situation the best option is C Lowering prices of goods and services

This will help to over come the competitors new credit terms and can boost the declining sales.

If you look at the other choices

A - You are facing a decline in sales and better credit terms by competitor, it will only help in early collection of dues from existing customers

b- When the sales is declining the cash sales will be no help

D - When the competitor is giving better credit terms this will adversely affect your sales as you reducing their credit limit.

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