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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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