Cash discounts-ROI . Calculate the approximate annual rate of return on investment of the following cash discount terms: 1. 1/15, n30. 2. 2/10, n60. 3. 1/10, n90. b. Which of these terms, if any, is not likely to be a significant incentive to the cus- tomer to pay promptly? Explain your answer.

Cash discounts-ROI . Calculate the approximate annual rate of return on investment of the following cash discount terms: 1. 1/15, n30. 2. 2/10, n60. 3. 1/10, n90. b. Which of these terms, if any, is not likely to be a significant incentive to the cus- tomer to pay promptly? Explain your answer.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Cash discounts - ROI

Annual credit sales of Nadak Co. total $340 million. The firm gives a 2% cash discount for payment within 10 days of the invoice date; 90% of Nadak's accounts receivable are paid within the discount period.

Definition Definition Money that the business will be receiving from its clients who have utilized the credit provided to buy its goods and services. The credit period typically lasts for a short term, lasting from a few days, a few months, to a year.

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