Question

If a company is given credit terms of 2/10, n/30, it should a. hold off paying the bill until the end of the credit period, while investing the money at 10% annual interest during this time. b. pay within the discount period and recognize a savings. c. pay within the credit period but don't take the trouble to invest the cash while waiting to pay the bill. d. recognize that the supplier is desperate for cash and withhold payment until the end of the credit period while negotiating a lower sales price.

Answer 1

B. pay within the discount period and recognize a savings.

Step-by-step explanation:

Option A is wrong because 2/10, n/30 means 2% will be discounted if the customer pays within 10 days. However, the customer has to pay the bill within 30 days. They will not get 10% annual interest.

Option C is wrong because there is no talk of investing any money.

Option D is wrong because the supplier will not withhold payment until the end of the period.

Option B is correct because the supplier wants to settle the payment quickly, and the customer will get savings.