Cash discounts are offered for which of the following reasons?
I. To speed up collection of accounts receivable.
II. To reduce a company's level of receivables investment and associated costs.
A) I only
B) II only
C) Both I and II
D) Neither I nor II

Question

Cash discounts are offered for which of the following reasons? 
I. To speed up collection of accounts receivable.
II. To reduce a company's level of receivables investment and associated costs.
A) I only
B) II only
C) Both I and II
D) Neither I nor II

Quizplus · Accepted Answer

Cash discounts are offered for both reasons mentioned in options I and II. Offering discounts for prompt payment encourages customers to pay their invoices quickly, thus speeding up the collection of accounts receivable. Additionally, offering early payment discounts can reduce a company's level of investment in receivables and the costs associated with managing them.

Cash Discounts Are Offered for Which of the Following Reasons