Assessment of Skills and Knowledge(ASK) in Fundamental Business Concepts Practice Test

What advantage do businesses gain by offering credit to customers?

1. Credit customers are more loyal

2. Credit customers commonly prefer cash payments

3. Credit customers are not as price conscious as cash customers

4. Credit customers have a higher income

The correct answer is: Credit customers are not as price conscious as cash customers

The advantage businesses gain by offering credit to customers primarily revolves around the behavior and preferences of credit customers compared to those who pay cash. When customers have the option to buy on credit, they may not be as focused on price as cash customers because they can spread the cost of the purchase over time. This flexibility often allows customers to buy more expensive items or larger quantities than they would if they were limited to cash transactions, where immediate payment is required. This behavior can lead to higher sales volume and increased revenue for businesses, as customers feel empowered to make purchases they may not have otherwise considered. In this context, credit customers may prioritize other factors, such as the value or benefits of a product, over its price, which can enhance customer loyalty and lead to repeat purchases. While loyalty, income levels, and payment preferences are important considerations, they do not directly align with the central reason businesses benefit from offering credit – that is, the increased purchasing power and willingness to spend that credit provides, which can significantly impact a company's sales and growth.