If a vendor's invoice states terms of sale of 2/10 net 30, the implied annual cost of interest from foregoing the discount would be:
A)18.25%
B)2.0%
C)12%
D)36.5%

Question

Quizplus · Accepted Answer

The implied annual cost of interest from foregoing the discount is calculated using the formula: (Discount % / (1 - Discount %)) * (365 / (Full payment due days - Discount days)). For 2/10 net 30, it is (2% / 98%) * (365 / 20) = 36.5%.

If a Vendor's Invoice States Terms of Sale of 2/10