Question

The credit terms 2/10, n/30 are interpreted as

a. 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.
b. 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days.
c. 30% discount if paid within 2 days.

Answer 1

The credit terms 2/10, n/30 offer a 2% discount for payments made within 10 days or require full payment in 30 days. This impacts financial decisions and management of cash flow in businesses.

Step-by-step explanation:

The credit terms 2/10, n/30 are interpreted as a 2% cash discount if the payment is made within 10 days, or the entire balance is due in 30 days. These terms are designed to encourage early payment and to define the period in which the invoice must be paid. In the context of credit, it is vital to understand these terms as they can affect cash flow and financial planning for both businesses and individuals.

Considering the scenarios provided, if a credit card company charges a late fee and daily charges for unpaid balances, it's crucial to manage payments efficiently to avoid such costs. Likewise, understanding the present value of investments, like bonds, in different interest rate environments is essential for financial decision-making.