A company that forgoes the discount when credit terms are 2/10 net 60 is essentially borrowing money from his supplier for an additional
A) 10 days.
B) 50 days.
C) 60 days.
D) 70 days.

Question

Quizplus · Accepted Answer

When credit terms are 2/10 net 60, the buyer is eligible for a 2% discount if payment is made within 10 days. If the buyer forgoes this discount, they have the full 60 days to pay the supplier without incurring any penalty. Therefore, by forgoing the discount, the buyer is essentially borrowing money from the supplier interest-free for an additional 50 days (60 days - 10 days).

A Company That Forgoes the Discount When Credit Terms Are