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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Definitions:

Competitive Forces

Factors that influence the competitive environment of a market, including rivalries among existing competitors, potential new entrants, substitute products, bargaining power of buyers, and bargaining power of suppliers.

Technological Change

Innovations or advancements in technology that improve processes, increase efficiency, or create new products or markets.

First-Class Mail

A category of postal service that provides expedited delivery of letters and small packages, often with priority over other mail.

Postal Service

A public or private organization that is responsible for the collection, transportation, and delivery of mail.