Suppose the Credit Terms Offered to Your Firm by Your

question 154

Multiple Choice

Suppose the credit terms offered to your firm by your suppliers are 2/10,net 30 days.Out of convenience,your firm is not taking discounts,but is paying after 20 days,instead of waiting until day 30.You point out that the approximate cost of not taking the discount and paying on day 30 is around 37 percent.But since your firm is not taking discounts and is paying on day 20,what is the effective annual percentage cost (not approximate) of your firm's current practice,using a 360-day year?

• A) 36.7%
• B) 105.4%
• C) 73.4%
• D) 43.6%
• E) 106.9%

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Definitions:

Transformational Equivalence

The ability to recognize that an object or problem can be represented in different ways while retaining its core properties or meaning.

Empirical Evidence

Information acquired by observation or experimentation that serves as the basis for knowledge or justification.

Mental Images

Visual representations in the mind of an object or scene which are not currently being sensed but recalled or imagined.

Structural Equivalence

A concept in social network analysis indicating that individuals have similar relationships to others in the network, although they may not be directly connected.