The primary objective of offering a cash discount is to ____.
A) reduce the firm's level of receivables investment
B) reduce the number of bad checks received from customers
C) encourage customers to place their orders prior to the peak selling period
D) avoid just-in-time orders

Question

Quizplus · Accepted Answer

The primary objective of offering a cash discount is to reduce the firm's level of receivables investment. Cash discounts are offered to encourage customers to make payments earlier than the due date, which reduces the amount of time the business has to wait to receive payment and decreases the amount of money tied up in accounts receivable. By receiving payment earlier, the business can use the cash to invest or finance other business activities.

The Primary Objective of Offering a Cash Discount Is to ____