The approximate effective cost (EC) of financing the discount price of trade credit under terms 2/10, net/30 using a 360 day year is:

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The effective cost of trade credit can be calculated using the formula: $$EC = \left( \frac{Discount\%}{1 - Discount\%} \right) \times \left( \frac{360}{Days\ post\ discount\ period} \right)$$. For terms 2/10, net/30, the discount is 2%, and the period after the discount period is 20 days (30-10). Plugging these values into the formula gives: $$EC = \left( \frac{0.02}{1 - 0.02} \right) \times \left( \frac{360}{20} \right) = \left( \frac{0.02}{0.98} \right) \times 18 = 0.020408 \times 18 = 0.367346$$, or 36.73%, which rounds to approximately 37.2%.

The Approximate Effective Cost (EC) of Financing the Discount Price