Suppose your firm is offered terms of 2/10 net 30 on its purchases. Assuming that your firm intends to buy on credit, good cash management practice suggests that a rational purchaser should pay between 20 and 30 days days?

Question

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Good cash management practice suggests that a rational purchaser should pay within the discount period to take advantage of the discount offered. The terms of 2/10 net 30 mean that the purchaser can take a 2% discount if they pay within 10 days, or they can pay the full amount within 30 days. By paying within 20-30 days, the purchaser can take advantage of the discount while still maintaining good cash flow.

Suppose Your Firm Is Offered Terms of 2/10 Net 30