Discounts and Credit Terms
Credit terms involve both the length of the credit time and the discount specified. The terms 2/10, n/30 means that a 2 percent discount is specified if the bill is paid before the tenth day after the date of invoice or else the total amount should be paid by the 30th day.
In assuming the credit terms to offer the firm should look at the profitability caused via longer credit and discount period or a higher rate of discount against rise cost.
Varying the discount includes an attempt to speed up the payment of obtainable. It can conclusion also in reduced bad debt losses.