Certified Management Accountant Practice Exam 2026 - Free CMA Practice Questions and Study Guide

The cost of change in credit terms often relates to how modifications in credit policies can impact the investment in accounts receivable. When credit terms are loosened, the result generally is an increased investment in receivables. This increase reflects the additional capital tied up in customer accounts as they may take longer to pay their debts.

To understand the cost aspect, it is essential to consider the opportunity cost of funds. When capital is invested in receivables rather than being utilized elsewhere, it represents a potential profit that is forgone. Therefore, the correct evaluation of the cost linked to the change in credit terms involves quantifying this increased investment in receivables and multiplying it by the opportunity cost of funds. This formula effectively captures the financial implications of any adjustments to credit policies, highlighting how those changes can lead to increased costs that must be considered in financial decision-making.