3. A firm offers credit terms of 3/15, net 20 to its customers, which means the

Question

3. A firm offers credit terms of 3/15, net 20 to its customers, which means the firm allows its customers to: a. take a 15 percent discount on the invoice price if payment is made on or before Day 20 of the billing cycle; after that, only a 3 percent discount will be available. b. take a 20 percent discount on the invoice price if payment is made on or before Day 15 of the billing cycle; after that, only a 3 percent discount will be available. ke a 3 percent discount on the invoice price if payment is made on or before Day 15 of the billing cycle; otherwise, the entire bill is due by Day 20. of the billing cycle; otherwise, the entire bill is due by Day 20. of the billing cycle; otherwise, the entire bill is due by Day 15. d. take a 15 percent discount on the invoice price if payment is made on or before Day 3 e. take a 20 percent discount on the invoice price if payment is made on or before Day 3

Explanation / Answer

c.take a 3 percent discount on the invoice price if payment is made on or before day 15 of the billing cycle: otherwise, the entire bill is due by day 20.

term 3/15 implies that 3% discount is available if payment is made in 15 days.

term net 20, implies that invoice amount due is to paid in full by day 20 , if not paid with in 15 days of discount period.

In other words paying within 15 days will help us in realising a discount of 3% of invoice amount, else full invoice is to be paid by 20th day.

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