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A Firm Is Offered Trade Credit Terms of 3/15,net 45

question 30

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A firm is offered trade credit terms of 3/15,net 45.The firm does not take the discount,and it pays after 67 days.What is the approximate annual cost of not taking the discount?


Definitions:

Early Retirement

The process of leaving one's job and ceasing to work before the traditional retirement age, often with financial support through a pension or savings.

Carrying Value

The net amount at which an asset or liability is valued on the balance sheet, also known as book value, factoring in depreciation, impairments, and amortization.

Fair Value Hedge

A hedge that is used to mitigate the risk of changes in the fair value of an asset or liability or an unidentified portion of such an asset or liability.

Fair Market Value

An estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller in the market.

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