Although there are some clear disadvantages associated with extending credit to customers, such as bad debt costs, most managers believe a particular advantage outweighs the costs. To which primary advantage do they refer?

Question

Business

Darion Hayes

19 May, 09:53

Although there are some clear disadvantages associated with extending credit to customers, such as bad debt costs, most managers believe a particular advantage outweighs the costs. To which primary advantage do they refer?

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Answers (1)

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Tate · Answer 1

The primary advantage they refer to is additional sales revenue.

Explanation:

Extending credit to customers is generally done through use of credit cards these days. This does allow the customers to buy goods and services on credit and pay later for those goods.

Offering credit is beneficial for both the shopkeepers or merchants and the buyers. Customers do not have to pay cash (as they can run out of cash at times), so they buy more and this increases the sales revenue for the merchants, which becomes the primary advantage for them and outweighs the costs.