Credit Terms Cash Discount Period The period of time during which a cash discount can be taken for early payment. For example, ?/10 allows a cash discount in the first 10 days from the invoice date Cash Discount -a percent(%)reduction in sales or purchase price allowed for early payment of invoices. For example, ? 107allows the customer to take a 2% cash discount during the cash discount period 10-16
10-16 Credit Terms Cash Discount -- A percent (%) reduction in sales or purchase price allowed for early payment of invoices. For example, ? / 10?allows the customer to take a 2% cash discount during the cash discount period. Cash Discount Period -- The period of time during which a cash discount can be taken for early payment. For example, ? / 10 allows a cash discount in the first 10 days from the invoice date
Example of Introducing a cash Discount A competing firm of Basket Wonders is considering changing the credit period from net 60 which has resulted in 6 A/R turns per year) to 2/10. net 60 Current annual credit sales of $5 million are expected to be maintained The firm expects 30% of its credit customers(in dollar volume) to take the cash discount and thus increase ar turns to 8 10-17
10-17 Example of Introducing a Cash Discount A competing firm of Basket Wonders is considering changing the credit period from net 60 (which has resulted in 6 A/R turns per year) to ?/10, net 60. Current annual credit sales of $5 million are expected to be maintained. The firm expects 30% of its credit customers (in dollar volume) to take the cash discount and thus increase A/R turns to 8