If a vendor's invoice states terms of sale of 2/10 net 60, the implied annual cost of interest from foregoing the discount would be:
A)13.2%.
B)14.6%.
C)2.0%.
D)13.7%.

Question

Quizplus · Accepted Answer

The formula to calculate the implied annual cost of interest from foregoing the discount is: [(Discount % / (100 - Discount %)) * (365 / (Full payment due days - Discount days))]. Plugging in the values: [(2 / (100 - 2)) * (365 / (60 - 10))] = 14.6%.

If a Vendor's Invoice States Terms of Sale of 2/10