Concept:Selling on credit means delivering goods now while payment is deferred, which exposes the seller to the risk of customers failing to pay.
Explanation:When goods are sold on credit, the seller gives up the goods immediately but collects cash only later.
The sale amount remains as accounts receivable until the customer pays.
Some customers may refuse to pay or become unable to pay, and such uncollected amounts become bad debts.
Bad debts are a direct financial loss to the business, so an increase in bad debts is a major disadvantage of credit selling.
Option B is wrong because credit sales lock up funds in debtors and therefore reduce, not increase, liquidity.
Option C is wrong because credit sales do not directly reduce profit; profit declines only indirectly when bad debts or collection costs arise.
Option D is wrong because offering credit generally attracts more customers and raises, not lowers, turnover.
Answer:A. increase in bad debts