Your Firm Buys on Credit Terms of 2/10, Net 45

question 90

Multiple Choice

Your firm buys on credit terms of 2/10, net 45, and it always pays on day 45.If you calculate that this policy effectively costs your firm R157,500 each year, what is the firm's average accounts payable balance?

• A) R1,234,000
• B) R75,000
• C) R157,500
• D) R625,000
• E) R750,000

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Definitions:

Ability-to-pay Principle

A taxation principle suggesting that taxes should be levied according to an individual's or entity's ability to pay, typically measured by income or wealth.

Ability-to-pay Principle

A tax principle stating that taxes should be levied according to an individual's or entity’s capacity to pay, typically measured by income or wealth.

Constitutional

Relating to the system of beliefs and laws that governs the organization and operation of a state or organization, typically documented in a written constitution.