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A corporation buys on terms of 2/15, net 30 days. It does not take discounts. It typically pays 40 days after the invoice date. Net purchases (CASH PRICE ) amount to $500,000 per year. On average, how
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A corporation buys on terms of 2/15, net 30 days. It does not take discounts. It typically pays 40 days after the invoice date. Net purchases (CASH PRICE ) amount to $500,000 per year. On average, how much "FREE" trade credit does the firm receive during the year

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Answer:

On average, the firm receives $20,547.65 free trade credit during the year

Step-by-step explanation:

According to the given data we have the following:

buy terms=2/15, free trade credit is 15 days., net=30 days

CASH PRICE amount= $500,000

Therefore, in order to calculate how much "FREE" trade credit does the firm receive during the year we would have to use the following formula:

Trade credit= (15/365)× $500,000= $20,547.95

On average, the firm receives $20,547.65 free trade credit during the year

User Veselin Davidov
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