If One of Your Firm's Customers Is "Stretching" Its Accounts

question 52

True/False

If one of your firm's customers is "stretching" its accounts payable, this may be a nuisance but does not represent a real financial cost to your firm as long as the firm periodically pays off its entire balance.

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Definitions:

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, detailing revenues, expenses, and net income or loss.

Terms 2/10, N/30

Payment terms indicating a 2% discount is available if payment is made within 10 days; otherwise, the net (full) amount is due within 30 days.

Gross Price Method

A pricing strategy where the price of a product or service includes all taxes, tariffs and fees that may apply to the transaction.

Sales Discounts

A reduction in the price of a product or service that is offered to a customer to encourage timely payment.