A Large Manufacturing Firm Has Been Selling on a 3/10

question 1

Multiple Choice

A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 3.5/9, net 25. What change might be expected on the balance sheets of its customers?

• A) decreased receivables and increased bank loans
• B) increased receivables and increased bank loans
• C) decreased payables and increased bank loans
• D) increased payables and increased bank loans

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Definitions:

Perfectly Horizontal

Describes a line or curve on a graph that has a slope of zero, indicating no change.

Demand Curve

Illustrates the relationship between the price of a good or service and the quantity demanded by consumers, typically downward sloping.

Relatively Elastic

Describes a situation where a small change in price leads to a greater change in quantity demanded or supplied.

Inelastic

A description of a good's demand when consumers’ demand for it does not significantly change with a change in the good's price.