The Calculated Cost of Trade Credit for a Firm That

question 48

True/False

The calculated cost of trade credit for a firm that buys on terms of 2/10 net 30 is lower (other things held constant) if the firm plans to pay in 40 days than in 30 days.

---

Definitions:

Tax-loss Carryforwards

A provision in the tax code that allows an individual or company to use losses from one year to offset future profits for tax purposes.

External Growth

Expansion of a company's operations through acquisitions, mergers, or partnerships, rather than through organic growth.

Avoid Paying Dividends

Strategies employed by companies to retain earnings instead of distributing them to shareholders as dividends, often to reinvest in the business or improve balance sheet health.

Poison Pills

A defensive strategy used by companies to prevent or discourage unwanted takeover bids by making the company less attractive to the potential acquirer.