Question

The rationale why companies offer customers credit is because: a. offering customers credit, helps with the firm's cash flow position. b. offering customers credit, helps match revenues with expenses for the same time period. c. allowing customers to pay with credit cards or on credit, makes it easier for them to buy, and it also attracts new customers. d. allowing customers to pay with credit card or on credit, forces a company to rely less on accounts receivables and more on accounts payables.

Answer 1

Answer:

c. allowing customers to pay with credit cards or on credit, makes it easier for them to buy, and it also attracts new customers

Explanation:

What is credit?

Credit is the amount you can borrow for a certain time.

Sales on credit means that the sale is done without the use of cash with the conditions given for a certain time limit.

Now purchasing without cash is a facility every customer enjoys. The basic objective of sales on credit is to increase the purchasing power of customer thus attracting more customers to the specific products.

Choice c is the best option.

Choice a is incorrect because cash flows involve cash as well.

Choice b is also incorrect because matching principle is not a market strategy . It is an accounting method.

The company needs increase in sales, which involves a marketing strategy.

In the matching principle the revenues are matched with expenses therefore credit sales ( revenue) will be matched with the expenses incurred to be able to make sales.

Choice d is incorrect credit sales increase accounts receivable not accounts payable.