Company default rate on account receivable when its too low, Financial Management

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Can a company have a default rate on its accounts receivable that is too low?  Explain.

A company might have a default rate on AR that would be considered too low if by liberalizing credit terms a significant increase in sales revenue and cash inflows were to result.  If the enhance in the default rate is more than offset by the increase in sales revenue after all incremental cash flows are considered a positive NPV could result.

 

 

 


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