A company is thinking of borrowing money at an 18% annual interest rate in order to pay a $30,000 invoice within the discount period.The invoice terms are 2/10,n/30.They should borrow the money because they will have a net savings of 19.2%.

Annual Interest Rate

The annual interest rate is the percentage charged on a loan or paid on an investment for a one-year period, representing the cost of borrowing or the earnings from an investment.

Net Savings

The amount left after subtracting a person's or organization's total expenses from their total income, often accumulated over time.

Discount Period

The time frame between the beginning of a loan or credit term and the date the full payment is due, during which a discount may be offered for early payment.