A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 2/20, net 90. What change might be expected on the balance sheets of its customers?
A) decreased receivables and increased bank loans
B) increased receivables and increased bank loans
C) increased payables and decreased bank loans
D) increased payables and increased bank loans

Question

Quizplus · Accepted Answer

The change in credit terms allows customers to pay later (net 90 instead of net 30), which would increase their accounts payable. Since they have more time to pay, they might not need to rely as much on bank loans, potentially decreasing them.

A Large Manufacturing Firm Has Been Selling on a 3/10