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    Costly Trade Credit

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    Ingram Office Supplies, Inc., buys on terms of 2/15, net 50 days. It does not take discounts, and it typically pays on time, 50 days after the invoice date. Net purchases amount to $450,000 per year. On average, what is the dollar amount of costly trade credit (total credit-free credit) the firm receives during the year? (Assume a 365-day year, and not the purchases are net of discounts.)

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    Solution Summary

    Ingram Office Supplies, Inc., buys on terms of 2/15, net 50 days. It does not take discounts, and it typically pays on time, 50 days after the invoice date. Net purchases amount to $450,000 per year. On average, what is the dollar amount of costly trade credit (total credit-free credit) the firm receives during the year? (Assume a 365-day year, and not the purchases are net of discounts.)

    $2.19