The correct answer is: D. None of the above
Cash discount terms offered by trade creditors should always be accepted, as they offer a financial incentive to pay early. The benefit of taking a cash discount is typically greater than the cost of borrowing the money to pay early. In addition, paying early can improve your credit score and strengthen your relationship with your suppliers.
Here is a brief explanation of each option:
- A. Benefit in very small
The benefit of taking a cash discount is typically greater than the cost of borrowing the money to pay early. For example, if a supplier offers a 2% cash discount for payment within 10 days, and you can borrow money at 1% interest, you would save money by taking the cash discount.
- B. Cost is very high
The cost of borrowing money to pay early is typically very low. For example, you can often borrow money at a 1% interest rate or less.
- C. No sense to pay earlier
There is always a sense to pay earlier, as it can save you money. In addition, paying early can improve your credit score and strengthen your relationship with your suppliers.