Firms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit, which affect the cost of asset of sale for the buyer as well as the seller.

Free Spirit Industries Inc. buys on terms of 2/15, net 30 from its chief supplier.

If Free Spirit receives an invoice for $2,100.98, what would be the true price of this invoice?

$2,573.70

$1,750.12

$2,058.96

$2,161.91

The nominal annual cost of the trade credit extended by the supplier is , assuming a 365-day year.

Suppose Free Spirit does not take advantage of the discount and then chooses to pay its supplier lateso that on average. On average, Free Spirit will pay its supplier on the 35th day after the sale. As a result, Free Spirit can decrease its nominal cost of trade credit by by paying late.

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