Purchases made on credit are due in full by the end of the billing period. Many firms extend a discount for payment made in the first part of the billing period. The original invoice contains a type of shorthand notation that explains the credit terms that apply.

(Note:

Assume a 365-day year.)a.Write the shorthand expression of credit terms for each of the following:

Cash discount	Cash discount period		Credit period	Beginning of credit period
1.1%	11 days		36 days	date of invoice
2.4%	10 days		25 days	end of month
2.5%	7 days		35 days	date of invoice
1.5%	10 days		65 days	end of month

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.b.For each of the sets of credit terms in part

a,

calculate the number of days until full payment is due for invoices dated March 12.c.For each of the sets of credit terms, calculate the cost of giving up the cash

discount.

d.If the firm's cost of short-term financing is

9.2%,

what would you recommend in regard to taking the discount or giving it up in each case?

a. The short-hand expression of the credit terms 1 is:

nothing

/

nothing

net

nothing

EOM

date of invoice

. (Round consistently and select from the drop-down menu.)