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in an attempt to improve the liquidity position of a company, the company is considering offering an early settlement discount to its customers. which of the following would be the outcome of offering early settlement discounts?
a-sales increase
b-administrative costs decrease
c-bad debts increasecorrect answer: sales increase.
Sir my doubt is why will the administrative costs not decrease? as bad debts are a part of administrative expenses, so the fact remains that early settlement discounts would offer the customers a chance to pay early at reduced rates would lead to a reduction in bad debts and hence a lowering of admin expense, so why not option B??
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