Why is some trade credit called free while other credit is called costly? If a firm buys on terms of2/10, net 30, pays at the end of the 30th day, and typically shows $300,000 of accounts payableon its balance sheet, would the entire $300,000 be free credit, would it be costly credit, or wouldsome be free and some costly? Explain your answer. No calculations are necessary.
Why is some trade credit called free while other credit is called costly? If a firm buys on terms of2/10, net 30, pays at the end of the 30th day, and typically shows $300,000 of accounts payableon its balance sheet, would the entire $300,000 be free credit, would it be costly credit, or wouldsome be free and some costly? Explain your answer. No calculations are necessary.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter21: Supply Chains And Working Capital Management
Section: Chapter Questions
Problem 8P: If a firm buys on terms of 3/15, net 45, but actually pays on the 20th day and still takes the...
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Why is some trade credit called free while other credit is called costly? If a firm buys on terms of
2/10, net 30, pays at the end of the 30th day, and typically shows $300,000 of accounts payable
on its balance sheet, would the entire $300,000 be free credit, would it be costly credit, or would
some be free and some costly? Explain your answer. No calculations are necessary.
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