A Firm Is Offered Credit Terms of 1/10 Net 45

question 91

Multiple Choice

A firm is offered credit terms of 1/10 net 45 EOM by a major supplier. The firm has determined thatit can stretch the credit period (net period only) by 25 days without damaging its credit standingwith the supplier. Assuming the firm needs short-term financing and can borrow from the bank on a line of credit at an interest rate of 14 percent, the firm should

• A) take the cash discount and finance the purchase with the line of credit, the cheaper source of funds.
• B) take the cash discount and pay on the first day of the cash discount period.
• C) give up the cash discount and pay on the 70th day after the date of sale.
• D) give up the cash discount and finance the purchase with the line of credit.

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Definitions:

Internal Marketing

The strategy of treating employees as internal customers to align them with the company's goals, thus improving service delivery and customer satisfaction.

Service Experience

The subjective perception and evaluation by a customer of the service delivered by a company or an organization.

Performance

A measurement of how efficiently and effectively a person, system, or machine operates to meet its goals.

Process

A series of actions or steps taken to achieve a particular end, often referring to production, business, or administrative procedures.