If the terms of a business exchange are 2/10 net 30, this means that the transaction
A) involves a cumulative discount if paid in 30 days.
B) involves a noncumulative discount.
C) offers a discount if the buyer lives within a ten-mile radius.
D) price does not include the cost of freight.
E) involves a cash discount if paid within ten days.

Question

Quizplus · Accepted Answer

The terms "2/10 net 30" mean that the buyer can take a 2% discount on the invoice price if the payment is made within 10 days; otherwise, the full net amount is due within 30 days. This is a common trade credit term that incentivizes early payment, thus E) involves a cash discount if paid within ten days is correct.

If the Terms of a Business Exchange Are 2/10 Net