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%

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Definitions:

Psychosexual Development

Freud's theory on how personality develops during childhood through a series of stages centered on erogenous zones.

Avoiding Relationships

A behavior pattern where an individual actively distances themselves from forming close or intimate relationships with others.

Transitional Object

An object, often a soft toy or blanket, used by children to provide psychological comfort in times of stress or change.

Psychosocial Development

A theory proposed by Erik Erikson that describes the impact of social experience across the whole lifespan, emphasizing the development of personality and the acquisition of social skills.