What Is the Effective Annual Cost of Credit Terms of 2/20

question 42

Multiple Choice

What is the effective annual cost of credit terms of 2/20, net 60, if the firm stretches the accounts payable to 80 days?

• A) 6.4 %
• B) 13.1%
• C) 21.1%
• D) 34.2%

---

Definitions:

Human Hearing

The ability of humans to detect and interpret sound waves through a complex process involving the ears and brain.

20 Feet

A measure of length equivalent to approximately 6.096 meters, often used in reference to distance or the dimensions of objects.

Sensory Adaptation

The adjustment of sensory receptors to continuous stimulation, leading to decreased sensitivity to that stimulus over time.

Unchanging Levels

A state or condition where there is no variation, fluctuation, or progression in intensity, degree, or quality over a certain period.