Which of the following statements is most correct?
A) Accruals are an expensive way to finance working capital.
B) A conservative financing policy is one in which the firm finances all of its fixed assets with long-term capital and part of its permanent net operating working capital with short-term, nonspontaneous credit.
C) If a company receives trade credit under the terms 2/10, net 30 days, this implies the company has 10 days of free trade credit.
D) Statements a and b are correct.
E) None of the answers above is correct.

Question

Quizplus · Accepted Answer

Trade credit terms of 2/10, net 30 days imply that the company can take a 2% discount if it pays within 10 days, otherwise, the full amount is due in 30 days. Thus, the company effectively has 10 days of free trade credit.

Which of the Following Statements Is Most Correct