If the Prompt Payment Discount Is Foregone, Which of the Following

question 253

Multiple Choice

If the prompt payment discount is foregone, which of the following credit terms implies the customer is borrowing at a rate that is less than 20% (assume 365 days per year) ?

• A)2/10, net 30
• B)1.5/10, net 30
• C)1/10, net 20
• D)3/20, net 75
• E)All of the above imply borrowing at 20% or more.

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Definitions:

Consumers

Individuals or entities that purchase goods and services for personal use or consumption.

External Costs

Costs incurred as a result of an economic activity that affects third parties who did not choose to incur that cost.

Free Enterprise

An economic system where private businesses operate in competition, largely free of state control, with the prices of goods and services determined by the open market.

Capital

Financial assets or the financial value of assets, such as buildings, machinery, and equipment, used to produce goods and services.