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A firm buys on terms of 2/10, net 20. It does not take the discount, and it generally pays after 80 days. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year
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Feb 2, 2024
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A firm buys on terms of 2/10, net 20. It does not take the discount, and it generally pays after 80 days. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year
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Greg Bulmash
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The nominal annual percentage cost of non-free trade credit can be calculated as:
(20/80) * (365/365) = 42.16%
Therefore, the nominal annual percentage cost of the firm's non-free trade credit is approximately 42.16% based on a 365-day year.
Tibalt
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Feb 6, 2024
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