Suppose your ﬁrm is offered terms of 2/10 net 30 on its purchases. Assuming that your ﬁrm intends
to buy on credit, good cash management practice suggests that a rational purchaser should pay
between 20 and 30 days days?

Question

Quizplus · Accepted Answer

Purchasing on credit with terms of 2/10 net 30 means that the purchaser can take advantage of a 2% discount if payment is made within 10 days, but the full amount is due within 30 days. To maximize cash flow and take advantage of the discount, a rational purchaser should aim to pay within the discount period, which is within 10 days. However, if the firm cannot pay within 10 days, good cash management practice suggests paying within 20-30 days to avoid late fees or damaging the firm's credit score.

Suppose Your ﬁRm Is Offered Terms of 2/10 Net 30