If a firm's terms are 2/10, net 30 days, and its DSO is 28 days, we can be certain that the credit department is functioning efficiently and the percentage of past due accounts is minimal.

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The DSO (Days Sales Outstanding) indicates the average amount of time it takes for customers to pay their invoices. A DSO of 28 days means that on average, customers are taking 28 days to pay their bills, which is longer than the 30-day payment terms. This suggests that there may be some past due accounts or slower payment behavior, which could indicate inefficiencies in the credit department or credit policies. The 2/10 discount offered for early payment is also not being taken advantage of, which could suggest a lack of incentive or communication to customers about the discount.

If a Firm's Terms Are 2/10, Net 30 Days, and Its