the assumption is that the payment terms will be repeated XX(360/25) times in a given year.

Savings rate offered X no. of times company can avail the benefit in a given year.

Usagi wrote: Does anyone please help me to understand this? I couldn't answer why we have to do this.($2/$98*360/25days). I understand $2/$98 but I can't get why I multiple 360 and divide 25days. Please teach me this. Bisk 51-59 59 Quail company's supplier offer terms of 2/10, net 35. Using a 360day year, what the approximate cost of foregoing the discount? a.36% b.29% c.21% d.19% The answer is b One means of answering this question is to assume a $100 gross invoice balance. On a $100 invoice, Quail could pay $98 (100*(1.0-0.02) at 10days or $100 at 35 days. In other words, Quail would pay $2 for borrowing $98 for 25 days (35-10days). The annualized percentage rate is approximately ($2/$98*360/25days).