Your company’s largest supplier has just notified you that it is changing its credit and payment terms. Previously, its standard terms were “n/30” and the company had no electronic payment option. Under its new policy, all customers (including your company) will have terms “2/10; n/30” and all payments must be by electronic funds transfer.
Required:
Explain the effect that these changes should have on your company’s accounts payable turnover ratio and average payment period. Be sure your answer provides sufficient rationale for your position.