If a firm sells on terms of 2/10,net 30 days,and its DSO is 28 days,then the fact that the 28-day DSO is less than the 30-day credit period tell us that the credit department is functioning efficiently and there are no past due accounts.

Question

If a firm sells on terms of 2/10,net 30 days,and its DSO is 28 days,then the fact that the 28-day DSO is less than the 30-day credit period tell us that the credit department is functioning efficiently and there are no past due accounts.​

Quizplus · Accepted Answer

A DSO of 28 days does not necessarily indicate efficiency or the absence of past due accounts; it simply means that, on average, receivables are collected in 28 days. Some accounts could still be past due, and others might be paying early, especially to take advantage of the 2% discount for paying within 10 days.

If a Firm Sells on Terms of 2/10,net 30 Days,and