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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Why do companies issue credit when their past experience indicates that some customers will not pay?

To determine

Credit Sales:

Credit sale is a way to encourage buyers and increase sales. Companies have to sale on credit instead the sales will be reduced and the profitability will be affected. Moreover, it is true that payments are sometimes getting uncollected but companies take it as an expense but cannot deny the credit sales for the business.

The reason for providing the credit sales after knowing the fact that there are some buyers whose amount will be uncollected.

Explanation

The companies provide the credit on sales for making the turnover increase which leads to increase in the profits of the business. These companies are of the view that if the profits are increasing by giving the credits then they are ready to be...

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