If a Firm Sells on Terms of 2/10 Net 30

question 64

True/False

If a firm sells on terms of 2/10 net 30 days, and its DSO is 28 days, then the fact that the 28-day DSO is less than the 30-day credit period tells us that the credit department is functioning efficiently and there are no past-due accounts.

---

Definitions:

Direct Costs

Costs that can be directly traced to a specific cost object, such as a product, service, or department.

Indirect Costs

Costs that cannot be directly attributed to the production of goods or services, such as overhead and administrative expenses.

Departmental Net Income

The net income generated by a specific department within an organization, after accounting for direct and allocated expenses.

Expenses

Expenses are the costs incurred in the process of generating revenues, encompassing costs like rent, utilities, salaries, and supplies.