What do you think might be a potential drawback to a company extending

QUESTION

What do you think might be a potential drawback to a company extending credit to its customers?

What will be an ideal response?

ANSWER

Answer: One drawback to a company extending credit to its customers is it may find it has a significant percentage of its assets tied up in credit, which means it will need to have an active collection arm, which costs money.
Explanation: There are several potential drawbacks to extending credit to customers. Among them is the extra cost potentially required for a collection arm, especially if the company feels it has a high percentage of its assets tied up in credit.