In the same vein liquidity problem is not left out when granting credit sales. This arises from
over investment in receivables especially when the debtors are of high risk class. A company
suffering from liquidity problem implies that the cost of obtaining funds from other sources
may be high and a credit sale beyond the optimal level of credit is dangerous. On the other
hand, sales level and profitability are reduced as a result of high or tight credit policy or not
granting credit at all.