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Credit Term Options' Effects on Sales

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Optical Supply Company offers credit terms of 2/10, net 60. If Optical Supply is considering a change in its credit terms to one of those indicated below, explain whether the change should increase or decrease sales.

(a) 2/10, net 30
(b) net 60
(c) 3/15, net 60
(d) 2/10, net 30, 30 extra.

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Solution Summary

This solution discusses how a change in a company's credit terms would decrease or increase sales.

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Lets first define what 2/10, net 60 means:

2 percent is the discount rate
10 is the discount period
60 is the credit period

Meaning, you will get a 2 percent discount if you ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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