Bad Debt Expenses
Another factor which is expected to be affected by changes in the credit . standards is bad debt (default) expenses. They can he expected to increase with credit standards and decrease if credit standards become more restrictive.
Besides establishing credit. standards, a firm should· develop procedures for evaluating credit applicants. The second aspect of credit policies of a firm is credit analysis and investigation. Two basic steps are involved in ,the credit investigation process: (a) obtaining ‘credit information, and (b). analysis of credit information. It is on the basis of credit analysis that the decisions to grant credit to a customer as well as the quantum of credit would be taken. .