Which of the following terms allows a buyer to take a 4 percent discount off the face value of the invoice if the invoice is paid within 20 days, and if not, the full face value of the invoice becomes due in 60 days?
A. 20/60, net 4
B. 2/10, net 60
C. 2/10, net 30
D. 10/4, net 60
E. 4/20, net 60
Answer: (E) This billing method is utilized by producers to encourage the early payment of invoices. It helps to increase cash flow for the manufacturer or producer. Most buyers take advantage of these types of terms because it allows a substantial savings on the purchase. (A), (B), (C), and (D) are different terms allowing for different discounts. They may not even make sense, and are thus incorrect choices.