Cash Discounts Are Mostly Used to Get New Customers in the Door

question 8

True/False

Cash discounts are mostly used to get new customers in the door since existing customers almost always use the delayed payment terms.

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Definitions:

Acid-test Ratio

A stringent indicator that determines whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory.

Quick Assets

Assets that can be quickly converted into cash without a significant loss in value, including cash, marketable securities, and accounts receivable.

Current Liabilities

Obligations or debts that a company must pay within one year or within its operating cycle if longer.

Gross Margin Ratio

A financial ratio that measures a company's financial health, calculated by subtracting the cost of goods sold from net sales and dividing by net sales.