Why extend credit to customers? Why does it make sense that you, as a manager, w
ID: 2380523 • Letter: W
Question
Why extend credit to customers? Why does it make sense that you, as a manager, would allow people to come pick up the products you sell and walk out without paying for them? Describe the benefits (and risks) of extending credit, including the effect of extending/not-extending credit on the income statement and balance sheet, to your 6th-grade niece.
Why extend credit to customers? Why does it make sense that you, as a manager, would allow people to come pick up the products you sell and walk out without paying for them? Describe the benefits (and risks) of extending credit, including the effect of extending/not-extending credit on the income statement and balance sheet, to your 6th-grade niece.Explanation / Answer
well if an item is bought on credit then the benifits to you as the manger and the store are that the customer is happy and will shop with you in the future. also the store makes money of intrest of the payments of that customer. also if that person is happy they may refer more people to shop with you bring in more money. the risk is that customer will not make payments therefor the store will lose that money. if it is a large enough amount the store may sue for the cost if the item is worth more than the legal fees. so on the balance sheet it looks as if the store for the mean time has lost money but when infact they well make more then the cost of the item from intrest when it is paid. not extending credit may look bad on a company many say that the company dont trust the public and the public may get upset and the company may have less sells because of the upset public not shopping with them
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