A2/10, Net 30 Credit Policy

question 57

Multiple Choice

A2/10, net 30 credit policy:

• A) Is an expensive form of short-term credit if a buyer foregoes the discount.
• B) Provides cheap financing to the buyer for 30 days.
• C) Is an inexpensive means of reducing the seller's collection period if everyone takes the discount.
• D) Tends to have little effect on the seller's collection period due to the high effective interest rate.
• E) Tends to increase a firm's investment in receivables as compared to a straight net 30 policy.

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