Question

In: Finance

The credit term 2/20, net 50 means that the buyers can take up 30 (50-20) days...

The credit term 2/20, net 50 means that the buyers can take up 30 (50-20) days to pay. But the firm allows buyers to take 2% discount if they pay in 20 days. Otherwise, they must pay the full amount within 30 days.

True

False

Solutions

Expert Solution

2/20, Net 50 means, 2% discount allowed in paid in 20 days. Full credit term is 50 [ 20 +30] Days with out discount.

Thus the stament is true.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Maddox Resources has credit sales of $196,000 yearly with credit terms of net 30 days, which...
Maddox Resources has credit sales of $196,000 yearly with credit terms of net 30 days, which is also the average collection period. Maddox does not offer a discount for early payment, so its customers take the full 30 days to pay. (Use 365 days in a year.) a-1. What is the average receivables balance? (Do not round intermediate calculations. Round the final answer to nearest whole dollar.) Accounts receivable balance           $ 16109.59 a-2. What is the receivables turnover? (Round...
Maddox Resources has credit sales of $185,000 yearly with credit terms of net 30 days, which...
Maddox Resources has credit sales of $185,000 yearly with credit terms of net 30 days, which is also the average collection period. Maddox does not offer a discount for early payment, so its customers take the full 30 days to pay. (Use 365 days in a year.) a-1. What is the average receivables balance? (Do not round intermediate calculations. Round the final answer to nearest whole dollar.) Accounts receivable balance           $ a-2. What is the receivables turnover? (Round the...
Maddox Resources has credit sales of $193,000 yearly with credit terms of net 30 days, which...
Maddox Resources has credit sales of $193,000 yearly with credit terms of net 30 days, which is also the average collection period. Maddox does not offer a discount for early payment, so its customers take the full 30 days to pay. (Use 365 days in a year.) a-1. What is the average receivables balance? (Do not round intermediate calculations. Round the final answer to nearest whole dollar.) Accounts receivable balance           $ a-2. What is the receivables turnover? (Round the...
Maddox Resources has credit sales of $193,000 yearly with credit terms of net 30 days, which...
Maddox Resources has credit sales of $193,000 yearly with credit terms of net 30 days, which is also the average collection period. Maddox does not offer a discount for early payment, so its customers take the full 30 days to pay. (Use 365 days in a year.) a-1. What is the average receivables balance? (Do not round intermediate calculations. Round the final answer to nearest whole dollar.) Accounts receivable balance           $ a-2. What is the receivables turnover? (Round the...
Company X has credit sales of $189,000 Annual credit terms of net 30 days, Collection period...
Company X has credit sales of $189,000 Annual credit terms of net 30 days, Collection period is 30 days. 3/10 discount worth it? Cash generated used for bank loans of 12% 3/10 discount causes 23% increase in sales Profit of 15% what is the change in annual income? Take offer?
Kim Mitchell, the new credit manager of the Vinson Corporation, was alarmed to find that Vinson sells on credit terms of net 90 days while industry-wide credit terms have recently been lowered to net 30 days
Kim Mitchell, the new credit manager of the Vinson Corporation, was alarmed to find that Vinson sells on credit terms of net 90 days while industry-wide credit terms have recently been lowered to net 30 days. On annual credit sales of $2.63 million, Vinson currently averages 95 days of sales in accounts receivable. Mitchell estimates that tightening the credit terms to 30 days would reduce annual sales to $2,505,000, but accounts receivable would drop to 35 days of sales and...
Analyzing a change in credit policy: Existing Policy: • 1/10 net 40 where 50% take the...
Analyzing a change in credit policy: Existing Policy: • 1/10 net 40 where 50% take the discount; 50% pay on 40th day • Sales: $ 6 million/year; Bad debts: 2% of sales Proposed Policy: • 2/10 net 50 where 70% are expected to take the discount; 30% expected to pay on 50th day • Expected sales: $ 7 million/year; Bad Debts (expected): 4% of sales Additional information: The companies variable costs are 60% of sales under both policies; Fixed costs...
2.   The credit terms are; 3/15 with a net date of 45 days (show work): a....
2.   The credit terms are; 3/15 with a net date of 45 days (show work): a. Calculate the interest savings associated with taking this discount: b. The Notes Payable or short-term borrowing rate is 5%. Should the discount be taken? c. Given your answer in part b, when should the purchasing company pay the bill?
Solarius Trading Company is considering lengthening its credit period from 30 to 50 days. All customers...
Solarius Trading Company is considering lengthening its credit period from 30 to 50 days. All customers will continue to pay on the net date. The firm currently has $300,000 of sales per year, but believes that as a result of the proposed change, sales will increase to $360,000. Bad debt expense will increase from 3% to 5% of sales. The variable cost is 70% of sales. The firm has a cost of capital of 12%. Assume a 360-day year. What...
A large retailer obtains merchandise under the credit terms of 2/15, net 30, but routinely takes 60 days to pay its bills.
Cost of Trade CreditA large retailer obtains merchandise under the credit terms of 2/15, net 30, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.%
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT