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Accounts payable and credit terms for customers

A company has been selling on a 3/10, net 30 basis. The company changes its credit terms to 2/20, net 90. The change will affect the customer's accounts payable and bank loan by:

increasing payables and decreasing bank loans or
increasing payables and increasing bank loans

Solution Preview

First, we need to find the cost of not taking the trade credit for both before and after the change as follows: -

Nominal = Discount Percent x 360 days
Annual cost 100 - Discount Percent Days ...

Solution Summary

This solution is comprised of a detailed explanation to answer the change that will affect the customer's accounts payable and bank loan.

$2.19