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Suppose the credit terms offered to your firm by its suppliers are 3/10, net 40 days. Your firm is not taking discounts, but is paying
Suppose the credit terms offered to your firm by its suppliers are 3/10, net 40 days. Your firm is not taking discounts, but is paying after 32 days instead of Day 40. You point out that the nominal cost of not taking the discount and paying on Day 40 is approximately 37%. But since your firm is neither taking discounts nor paying on the due date, what is the effective annual percentage cost (not the nominal cost) of its costly trade credit, using a 365-day year? a. 41.4% b. 55.3% c. 65.8% d. 51.3% e. 61.0%
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