Question

Selling accounts receivables to factors and allowing credit terms such as 2/10, n/30 Select one: a. All of these answer choices are correct. b. result in collections that are less than the gross accounts receivable. c. represent ways to accelerate receivables collections. d. represent common business practices.

Answer 1

Answer:

C. Represent ways to accelerate receivable collections            

Explanation:

The factor are the companies that recover collections from customer and charge fees for the services rendered. The factors are specialized companies who make the collection from customer in faster and professional ways.

While 2/10,n/30 are discount allowed to customer to pay faster. The term means 2% discount will be allowed if the customer pays within 10 days from date of sale, otherwise credit period is 30 days. As a result if this, customer are lured to pay earlier then the normal credit period.

Answer 2

Answer: a. All of these answer choices are correct

Explanation:

The credit term The term 2/10, n/30 is a typical credit term and means that,

2 shows the percentage discount being offered by the seller so 2%.

"10" is the number of days within which a buyer must pay their invoice to qualify for the discount.

"n/30" means that if the buyer does not pay the amount in 10 days then they have to pay the full amount in 30 days.

This term therefore results in collections that are less than the gross accounts receivable (b), represent ways to accelerate receivables collections (c) as time limits are imposed and is quite a common business practice (d).

All of the above are correct in this instance.

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