When credit terms for a sale are 2/15, n/40, the customer saves by paying the bill early. Approximately what percent would this savings amount to on an annual basis?

Question

Quizplus · Accepted Answer

The discount is 2% if the bill is paid within 15 days. If the bill is not paid within 15 days, the full amount is due within 40 days. The savings is therefore 2% of the bill amount. If the bill is paid on average 30 days after the invoice date, the savings would be 2% / 30 days * 365 days = 24.33% per year.

When Credit Terms for a Sale Are 2/15, N/40, the Customer