Bradley Mfg. changed its credit terms from 2/10 net 30 to 2/10 net 40. In doing so, the ﬁrm has
lowered the effective annual cost of credit for their customers.

Question

Quizplus · Accepted Answer

By extending the payment period from 30 days to 40 days, customers now have more time to pay and can take advantage of the 2% discount offered for early payment. This effectively reduces the cost of credit for customers who take advantage of the discount, making it a more attractive option.