If creditors' payment terms are 60 days,financing period is 20 days,and it takes 30 days to collect the amount from customers.What time does it take to sell the inventory?
A)60 days.
B)20 days.
C)30 days.
D)50 days.

Question

Quizplus · Accepted Answer

To sell the inventory, we need to consider the longest time period involved in the process, which is the time it takes to collect payment from customers (30 days) added to the payment terms (60 days) from creditors. Therefore, the total time it takes to sell the inventory would be 30 days + 60 days = 90 days. However, as we have a financing period of 20 days, we can subtract it from the total time to get the best choice. Therefore, the time it takes to sell the inventory would be 90 days - 20 days = 70 days. As option D is the closest to 70, it is the correct choice.

If Creditors' Payment Terms Are 60 Days,financing Period Is 20