A firm has just received an invoice for $1,000 with the following terms: 3/10, net 30. In this case, the firm: A) should not worry about earning the cash discount because the amount is small. B) can take a 10 percent discount if it pays within 3 days, and otherwise the full amount is due in 30 days. C) can take a 3 percent discount if it pays the invoice on the 30^th day. D) in effect, will be borrowing at an annual rate of 54 percent if it pays the invoice in 30 days. E) should pay $900 if it pays within 10 days.

Question

Quizplus · Accepted Answer

The terms 3/10, net 30 mean a 3% discount is available if paid within 10 days. If the firm pays on the 30th day, it forgoes the discount, effectively borrowing at a high annual rate.

A Firm Has Just Received an Invoice for $1,000 with the Following