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need to know 4 exam

exam preparation 2023 finance

QuestionAnswer
what does the credit term of 2/10, net 30 mean 2% discount (the size of the cash discount) if payment is made within 10 days (the cash discount period) from the date of the sale (the date the credit period begins), otherwise the full invoice amount is due in 30 days (the credit period) from sale date
why is a trade credit a spontaneous source of funds it varies in proportion to the borrower's level of operations. As operation expand, so does the company's purchases. the accounts payable increase and help to financed increased assets
what does the credit term of 2/10, net 30 mean 2% discount (the size of the cash discount) if payment is made within 10 days (the cash discount period) from the date of the sale (the date the credit period begins), otherwise the full invoice amount is due in 30 days (the credit period) from sale date
what would be the positive effect on a company's liquidity if it altered its trade credit policy from 2/10, net 90 to 2/10, net 30 the company would expect its liquidity to improve because its customers have to pay 60 days sooner
what would be the negative effect on a company's liquidity if it altered its trade credit policy from 2/10, net 90 to 2/10, net 30 it might find some of its customers go to another company that offers easier payment terms. this would reduce sales and could adversely affect liquidity in the long term
what is a benefit of business debt it can create more tax deductions, and make it easier to forecast expenses because loan payment s do not fluctuate
what is an advantage of debt financing once it is paid off, the liabilitiy is over, the lender has no control over the business anymore.
Created by: cristym
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