BU127 Chapter Notes - Chapter 7: Debit Card, Accounts Receivable, Cash Cash
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BU127 Full Course Notes
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Companies accept credit cards for several reasons: to increase sales, to avoid provide credit directly to customers, to avoid losses due to bad checks, to avoid losses due to fraudulent credit card sales, to receive payment quicker. When credit card sales are made, the company must pay the credit card company a fee for the service it provides. Sales discounts to business: when customers purchase on open account, they may be offered a sales discount to encourage early payment. 2/10, n/30 read as: two ten, net thirty. 20 days early (the 10th day instead of the 30th), which is equivalent to an annual 37 percent. Interest rate for 20 days = amount saved/ amount paid. Interest rate for 20 days = / = 2. 04% Annual interest rate 365 days/20 days *2. 04% = 37. 23% Offer sales discount to encourage customers to pay more quickly.
