If the Firm Chooses to Pay on Time but Does

question 51

Multiple Choice

If the firm chooses to pay on time but does not take the discount, what is the effective annual cost of its trade credit? (Assume a 365-day year.)

• A) 17.81%
• B) 19.66%
• C) 23.45%
• D) 27.43%

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Definitions:

Profit-Maximizes

The strategy or action by a firm to adjust its production and pricing to achieve the highest possible profit.

Cost

The value of everything a seller must give up to produce a good.

Long Run Adjustment

The process through which input levels, production capacities, and market prices stabilize in response to sustained changes in demand or supply.

Profit-Maximizes

Refers to a strategy or actions by firms aiming to achieve the highest possible profit given their constraints and market conditions.