Your Firm Buys on Credit Terms of 2/10, Net 45

question 21

Multiple Choice

Your firm buys on credit terms of 2/10, net 45 days, and it always pays on Day 45. If you calculate that this policy effectively costs your firm $159,621 each year, what is the firm's average accounts payable balance? (Hint: Use the nominal cost of trade credit and carry its cost out to 6 decimal places.)

• A) $1,234,000
• B) $ 75,000
• C) $ 157,500
• D) $ 625,000
• E) $ 750,000

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Definitions:

Task Repetition

The repeated execution of a particular task or set of tasks, often leading to efficiency improvements but sometimes resulting in boredom or strain.

Assembly Job

Employment that involves putting together components or parts, often in a manufacturing or production line setting.

Accident-Prone

A tendency to be more likely to experience accidents than the average person.

Optimistic

The tendency to see the positive side of things and expect the best possible outcome.