Question

How
to interpret and use credit terms?

Answer #1

Basically Credit terms are nothing but the seller's payment requirements, that are to be met by the buyer in order to avail some benefit out of the transaction like discounts. It briefly tells about the amount and time of the payment to be made by the buyer. Seller provides for credit terms in order for the buyer to make an early payment, so that the seller can use the amount which otherwise would have been blocked in Debtors, else where to gain some interest out of it. Hnece he should also make sure that the discounts he offers to the buyers are not more than the interests that he could gain elsewhere,due to the early payment by the buyer.

When the terms say , 2/10,n/30, it means, if the amount is paid by the buyer within ten days, he can get a discount of 2% on his payment,and no discount if he takes more than 10 days.

Interpret the solubility of vitamins A and C in water and
ligroin in terms of the nature of the intermolecular forces between
the molecules and the solvents.

Dome Metals has credit sales of $414,000 yearly with credit
terms of net 60 days, which is also the average collection period.
Assume the firm adopts new credit terms of 4/10, net 60 and all
customers pay on the last day of the discount period. Any reduction
in accounts receivable will be used to reduce the firm's bank loan
which costs 10 percent. The new credit terms will increase sales by
20% because the 4% discount will make the firm's...

. The credit terms are 2/10 net 30. Which of the terms is the
credit period?
2
10
30
20
5. Increasing the credit discount from 3% to 4% would:
Increase the interest savings associated with the discount
Decrease the interest savings associated with the discount
Have no impact on the interest savings
6. The interest rate savings associated with the discount is 12%
and the short-term borrowing rate is 5%. The company should:
The company should not take the...

Dome Metals has credit sales of $504,000 yearly with credit
terms of net 60 days, which is also the average collection period.
Assume the firm adopts new credit terms of 3/18, net 60 and all
customers pay on the last day of the discount period. Any reduction
in accounts receivable will be used to reduce the firm's bank loan
which costs 10 percent. The new credit terms will increase sales by
15% because the 3% discount will make the firm's...

Dome Metals has credit sales of $396,000 yearly with credit
terms of net 45 days, which is also the average collection period.
Assume the firm adopts new credit terms of 3/18, net 45 and all
customers pay on the last day of the discount period. Any reduction
in accounts receivable will be used to reduce the firm's bank loan
which costs 10 percent. The new credit terms will increase sales by
15% because the 3% discount will make the firm's...

Dome Metals has credit sales of $288,000 yearly with credit
terms of net 120 days, which is also the average collection period.
Assume the firm adopts new credit terms of 3/18, net 120 and all
customers pay on the last day of the discount period. Any reduction
in accounts receivable will be used to reduce the firm's bank loan
which costs 10 percent. The new credit terms will increase sales by
15% because the 3% discount will make the firm's...

Dome Metals has credit sales of $396,000 yearly with credit
terms of net 45 days, which is also the average collection period.
Assume the firm adopts new credit terms of 3/18, net 45 and all
customers pay on the last day of the discount period. Any reduction
in accounts receivable will be used to reduce the firm's bank loan
which costs 10 percent. The new credit terms will increase sales by
15% because the 3% discount will make the firm's...

Dome Metals has credit sales of $234,000 yearly with credit
terms of net 30 days, which is also the average collection period.
Assume the firm adopts new credit terms of 2/18, net 30 and all
customers pay on the last day of the discount period. Any reduction
in accounts recevable will be used to reduce the firm's bank loan
which costs 10 percent The new credit terms will increase sales by
10% because he 2% discount will make the firm's...

2. How might managers interpret the potential for their product
in a market that is, in absolute economic terms, large, but on a
per-capita basis, characterized by a majority of poor
consumers?

A firm has credit sales of 144,000 yearly with credit terms 30
days that is also the average collection period and no discount for
early payment. Now it considers new trade terms of 2/10 net 30
days.
What would be the incremental decrease in account receivables if
the new trade terms are accepted by all customers?

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