A firm's bad debts:A) should be reduced by more aggressive collection procedures.B) are normally positively related to a firm's ACP.C) are normally unaffected by changes in a firm's cash discount.D) a and bE) All of the above

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Akshay Landge · Accepted Answer

Final Answer : D, Explanation :  Bad debts can be reduced by more aggressive collection procedures, such as stricter credit policies and quicker follow-up on overdue accounts. However, bad debts are also positively related to a firm's accounts receivable turnover and thus its average collection period (ACP), as a slower turnover or longer ACP indicates a higher risk of customers defaulting. Cash discounts may not have a significant impact on bad debts as they relate to the creditworthiness of customers rather than their incentives to pay earlier for a discount.

A firm's bad debts:

A) should be reduced by more aggressive collection procedures.
B) are normally positively related to a firm's ACP.
C) are normally unaffected by changes in a firm's cash discount.
D) a and b
E) All of the above

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