You are studying with some classmates and are reviewing each others responses to the following questions: Why
Question:
You are studying with some classmates and are reviewing each other’s responses to the following questions:
“Why do companies off er sales discounts to customers? How would a sales discount 1/10; n/45 on a $2,000 purchase be interpreted?”
Your classmate responds as follows:
“Companies off er sales discounts in order to increase the amount of revenue they earn and to speed up the collection of cash from customers. If you are offered a sales discount of 1/10; n/45 on a $2,000 purchase, it means that you must pay before 10 days and, if you do, you will get 10% off , so you will only have to pay $1,800 to settle the account.”
Required
Identify how your classmate’s answer could be substantively improved.
Step by Step Answer:
Understanding Financial Accounting
ISBN: 9781119406921
2nd Canadian Edition
Authors: Christopher D. Burnley