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Accounting and annual rates of return

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Answer the following questions assuming a 360-day year. Calculate the approximate annual rate of return on investment of the following cash discount terms:

1/15, net 30
2/10, net 60
1/10, net 90

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Solution Summary

The solution depicts the steps by step methodology to calculate the approximate annual rate of return on investment of the given cash discount terms.

Solution Preview

Recall the following:
Annual rate of return = [Discount %/(100%-Discount %)]* [Number of days in a year/(Credit Period-Discount Period)]

a) 1/15, net 30
Discount = ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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