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:

Utilitarianism

A philosophical theory that suggests the best action is the one that maximizes utility, usually defined as that which produces the greatest well-being of the greatest number of people.

Ethical Relativism

The philosophical view that moral standards, values, and judgments are not universal but are culturally and individually determined.

Open-Mindedness

The willingness to consider new ideas, arguments, and information without bias or predetermined conclusions.

Moral Behavior

Actions that conform to accepted standards of good or right conduct, often based on societal or personal ethical principles.