Deciding Whether or Not to Take a Trade Discount, the Cost

question 26

True/False

deciding whether or not to take a trade discount, the cost of borrowing from a bank or other source should be compared to the cost of trade credit to determine if the cash discount should be taken.

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Definitions:

Average Collection Period

The average number of days it takes for a company to collect receivables from its customers, indicating the efficiency of its credit policies.

Discount Period

The time frame in which a buyer can pay less than the full amount due on an invoice if payment is made promptly, incentivizing early payment.

Credit Term

The agreement between a buyer and a seller that defines the amount of time a buyer has to pay for goods.

Earnings per Share

A financial metric calculated by dividing a company's net income by the number of its outstanding shares of common stock.