Ningbo Steel Was Extended Credit Terms of 3/15 Net 30

question 116

Multiple Choice

Ningbo Steel was extended credit terms of 3/15 net 30 EOM.The cost of giving up the cash discount,assuming payment would be made on the last day of the credit period,is 75.26 percent.If the firm were able to stretch its accounts payable to 60 days without damaging its credit rating,the cost of giving up the cash discount would only be

• A)16.81%
• B)16.25%
• C)23.90%
• D)27.09%
• E)none of the above

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Definitions:

Vertical Analysis

A method of financial statement analysis in which each line item is listed as a percentage of a base figure, facilitating comparisons.

Comparative Balance Sheet

A financial statement that presents the financial position of a company at different points in time, side-by-side, to facilitate comparison.

Plant Assets

Tangible resources that are used in the operations of the business and are not intended for sale to customers.

Disposal Of A Segment

The process of eliminating a division or part of a business, which may involve selling, closing, or spinning off.