Cash discounts are offered for which of the following reasons?
I. Speed up collection of accounts receivable
II. Reduce a company's level of receivables investment and associated costs.
A) I only
B) II only
C) Both I and II
D) Neither I nor II

Question

Quizplus · Accepted Answer

Both I and II are valid reasons for offering cash discounts. Offering a discount for early payment can incentivize customers to pay their invoices sooner, thus speeding up the collection of accounts receivable. Additionally, cash discounts can reduce the level of receivables investment and associated costs by encouraging customers to pay off their obligations more quickly.

Cash Discounts Are Offered for Which of the Following Reasons