Question

Do you think that credit policy decisions are made more on the basis of numerical analyses or on subjective judgment? Explain.

Answer 1

Giving credit will definitely increase sales revenue which will be good to the company at the same time when we extend credit there will be definitely a chance of bad debts and our credit policy should be aimed to acheive increased sales and reduced bad debts it depends on no of days credit period is offered and cash discount we are providing for early payment

Credit policy decisions were based on both numerical analysis and subjective judgement credit policy decisions can not be taken only based on either numerical analysis or subjective judgement if we take decision based on numerical analysis there is a inherent risk that we may be deceived by numbers than his character so for small scale credit decisions are taken on subjective judgement where there are numerous customers decisions will be more based on numerical analysis