Effects of extending customer credit
You have a sole-proprietorship merchandising business dealing with photography equipment. The business was established three years ago, and it has had an average annual turnover of $50,000. However, over the last six months, the monthly sales have fallen considerably. To reverse this downward slide, you are considering selling the products on a credit basis of 15 days to all your regular customers. There are approximately 25-30 such customers. In turn, you also plan to ask your vendors to increase the credit period from 15 days to 25 days for all payments. Is buying or selling the products on credit basis a good decision? Explain.