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Credit occurs where the payment method is progressive or in instalments with an agreed specified time between the seller and the buyer. In business, risks, as Amankwah-Amoah and Wang (2019) stipulate, are the possible dangers to and unwelcome repercussions on a companys performances, renowned capital, customer base, and income. On the other hand, opportunities are a combination of activities that happen simultaneously and can culminate in a positive outcome if taken advantage of.
The main focus is to look at the risks (disadvantages) and the opportunities (advantages) that consumers and businesses may obtain due to acquiring automobiles or appliances on credit from dealers. The risks associated with credit buying include; first, a possibility of negative debts as a consequence of buyers not settling their debts leading to poor credit score of a consumer.
Secondly, there exists a negative impact on cash flow this accrues to the fact that cash payment of the commodities (automobiles or appliances) obtained is not done immediately but rather at a future agreed time. Consequently, credit buying encourages overspending by customers or businesses as cars or appliances attract higher interest rates. Lastly, it reduces the future purchasing power of a company or a consumer since future incomes will be used to pay for what was bought on credit in the past.
Opportunities or advantages that a business or consumer may enjoy due to credit buying include increased sales volume for enterprises, thus increasing revenues and profits. Secondly, one can acquire an automobile or an appliance that he cannot afford because payment is usually processed later. Lastly, it enables an individual to use an automobile, for instance, a car, and an appliance, as payment plans are made at a future agreed time with the dealer. As such, it is the role of the buyers to ensure they meet the terms of agreement of credit to reduce the risks associated with credit and maximize the opportunities it has.
References
Amankwah-Amoah, J., & Wang, X. (2019). Opening editorial: Contemporary business risks: An overview and new research agenda. Web.
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