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What are credit risks and costs as compare to cash sales?

a)  Contract default risk - the seller not only loses goods and cash from sales, but has to incur collection expenses as well.

b)  Opportunity cost – your restricted cash on credit shall not be invested or utilized for other business activities.

c)   Guarantee or mortgage risk – you have to incur cost to verify the value of the guarantee or the collateral from the buyer and take risk of their validity.

d)   Cost to maintain a credit management function;

e)   Cost relating to training provided to credit management department;

f)     Time cost – purchasing power of same amount shall decrease;

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