What is cash discount in purchasing?

What is cash discount in purchasing?

• A. A discount offered for bulk purchases
• B. A discount offered for prompt payment
• C. A rebate after a year
• D. A discount for early supplier onboarding

Answer: (B)

Cash discount in purchasing refers to a price reduction that suppliers offer to encourage you to pay promptly. A cash discount is earned if you pay within a specified period, typically described in terms like 2/10, net 30—meaning you can take a 2% discount if you pay within 10 days, otherwise the full amount is due in 30 days. This isn’t a discount for buying large quantities (that would be a bulk/quantity discount) nor a rebate that arrives after a year or a discount for onboarding. Taking the discount lowers the amount you actually pay and can improve cash flow; if you don’t take it, you pay the full invoice amount.

Cash discount in purchasing refers to a price reduction that suppliers offer to encourage you to pay promptly. A cash discount is earned if you pay within a specified period, typically described in terms like 2/10, net 30—meaning you can take a 2% discount if you pay within 10 days, otherwise the full amount is due in 30 days. This isn’t a discount for buying large quantities (that would be a bulk/quantity discount) nor a rebate that arrives after a year or a discount for onboarding. Taking the discount lowers the amount you actually pay and can improve cash flow; if you don’t take it, you pay the full invoice amount.