A 2/10, Net 30 Credit Policy

Multiple Choice

A 2/10, net 30 credit policy:

A) Is an expensive form of short-term credit if a buyer foregoes the discount.
B) Provides cheap financing to the buyer for 30 days.
C) Is an inexpensive means of reducing the seller's collection period if everyone takes the discount.
D) Tends to have little effect on the seller's collection period due to the high effective interest rate.
E) Tends to increase a firm's investment in receivables as compared to a straight net 30 policy.