Cascade International Currently Has Credit Terms of Net 45 with No

question 148

Multiple Choice

Cascade International currently has credit terms of net 45 with no discount and an average collection period of 48 days. Cascade believes that if it offered a 2/15 discount, 60% of its sales
Would be collected within the discount period and the remaining customers would pay in 50 days.
By how many days will Cascade's average collection period change if the discount policy is
Adopted?

• A) -29 days
• B) -28 days
• C) -19 days
• D) -10 days
• E) 2 days

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Definitions:

Fraudulent Inducement

A legal claim based on a misrepresentation of fact that leads another to enter into a contract or transaction with detrimental reliance on that misrepresentation.

Infancy

A stage in human development from birth up to, but not including, puberty; in legal terms, refers to a period during which a person is considered a minor and under the protection of guardians or parents.

Negotiability

Negotiability refers to the quality of a financial instrument that enables it to be transferred from one party to another in exchange for money or as payment.

Conditional Payment

A payment that is due only upon the occurrence of a specific event or satisfaction of a particular condition.