Which of the Following Changes to the Terms of Credit

question 3

Multiple Choice

Which of the following changes to the terms of credit would make the effective annual rate increase?

• A)Increase the cash discount percentage
• B)Extend the discount period
• C)Extend the payment period
• D)All changes above will increase the effective rate

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Definitions:

Date of Payment

The specific day on which a payment is due or processed.

Accounts Receivable

Money owed to a business by its clients or customers for goods or services provided on credit.

Average Collection Period

The average number of days it takes for a business to collect its receivables from customers.

Quick Assets

Assets that can be converted into cash quickly without significantly affecting their value, such as cash, marketable securities, and accounts receivable.