# Short-hand expression; number of days

Credit terms: need the short hand expression, the number of days until full payment is due, and explanation needed. Half of each answer has been completed. Please see attached.

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Credit terms

Purchases made on credit are due in full by the end of the billing period. Many firms extend a discount for payment made in the first part of the billing period. The original invoice contains a type of "short-hand" notation that explains the credit terms that apply (assume a 365 day year).

A) Write the short-hand expression of credit terms for each of the following

Cash discount Cash discount period Credit period Beginning of credit period

1% 15 days 45 days Date of invoice

2% 10 days 30 days End of month

2% 7 days 28 days Date of invoice

1% 10 days 60 days End of month

1/15 net 45 date of invoice

2/10 net 30 EOM

?? net ?? date of invoice

?? net ?? EOM

B) For each of the sets of credit terms in part A, calculate the number of days until full payment is due for invoices dated March 12

45 days

? days

28 days

? days

C) If the firm's cost of short-term financing is 8%, what would you recommend in regard to taking the discount or giving it up in each case?

For the first three purchases the firm would be ??? to ??? the funds and take the ??. The annual cost of not taking the discount is ?? than the firm's 8% cost of capital in the last case.

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#### Solution Preview

See the attached file. Thanks

Credit terms

Purchases made on credit are due in full by the end of the billing period. Many firms extend a discount for payment made in the first part of the billing period. The original invoice contains a type of "short-hand" notation that explains the credit terms that apply (assume a 365 day year).

A) Write the short-hand expression of credit terms for each of the following

Cash discount Cash discount period Credit period Beginning of credit period

1% 15 days 45 ...

#### Solution Summary

This post shows how to calculate the short-hand expression of credit terms, calculate the number of days until full payment is due for invoices dated March 12.