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    Question

    If a company decides to relax its credit policy in order

    to increase sales, which of the following outcomes is a potential negative financial consequence?
    A Reduction in inventory holding period due to higher turnover Correct Answer Incorrect Answer
    B Improvement in the overall cash conversion cycle Correct Answer Incorrect Answer
    C Decline in gross profit margin due to lower selling prices Correct Answer Incorrect Answer
    D Rise in bad debt risk and increased opportunity cost of funds tied in receivables Correct Answer Incorrect Answer

    Solution

    The correct answer is D

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