Chapter 3 - Mike Solomich 1 How does retail credit differ from cash credit Retail credit is used by customers to purchase final goods and services

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Mike Solomich 1. How does retail credit differ from cash credit? Retail credit is used by customers to purchase final goods and services directly from sellers while cash credit allows the user with cash or more generalized purchasing power to use for a variety of purposes. Retail credit is often offered by the store or service provider to furnish an alternative means of payment if the purchaser does not wish to use cash 2. List and describe five important benefits for the retail firm providing retail and service credit The five important benefits for the retail firm to provide retail and service credit is that it increases sales volume, better quality products sold, match competition, attract convenience-oriented customers, and strengthen customer ties. Customers using retail credit tend to spend more and generally purchase better-quality products. Some retailers also believe that offering credit programs provides an opportunity to strengthen customer loyalty. 3. List and describe five potential costs or problems arising from retail credit programs. There are many problems that could arise from retail credit. It will increase operating costs because they will have to promote their line of credit. They will need extra equipment, space, and personnel to run the credit programs. Collection problems will occur since some customers will fail to pay and may require legal action. The retailer may have to borrow additional funds to pay for the merchandise if the time frame for customer payments does not match the terms of sale for the inventory. And disagreements about credit activities can adversely affect customer relations and the image of the retailer in the community.
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This note was uploaded on 11/15/2009 for the course ENG 401 taught by Professor Mess during the Spring '09 term at Northwood University, Michigan Campus.

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Chapter 3 - Mike Solomich 1 How does retail credit differ from cash credit Retail credit is used by customers to purchase final goods and services

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