A firm purchases $4,562,500 in goods over a 1-year period from its sole supplier. The supplier offers trade credit under the following terms: 2/15, net 50 days. Davis finally chooses to pay on time (pay in the 50th day) but not to take the discount. We assume 365 days per year. What is the average level of the company’s free trade credit?

$187,500

Based on the information from Question 31, what is the effective annual cost of the firm’s costly trade credit?

Answer rating: 100% (QA)

To calculate the average level of the companys free trade credit we can first calculate the cost of ... View the full answer