A Firm Is Offered Credit Terms of 2/10 Net 45

question 62

Multiple Choice

A firm is offered credit terms of 2/10 net 45 by most of its suppliers but frequently does not have the cash available to take the discount. The firm has a credit line available at a local bank at an interest rate of 12 percent. The firm should ________.

• A) give up the cash discount, financing the purchase with the line of credit
• B) take the cash discount and pay on the 45th day after the date of sale
• C) take the cash discount and pay on the first day of the cash discount period
• D) take the cash discount, financing the purchase with the line of credit, the cheaper source of funds

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