Contractor License Practice Exam

What does "2/10 prox net 30" indicate regarding payment terms?

1. A 2% discount if paid next quarter

2. A 2% discount if paid by the 10th day of the month following purchase

3. A 10% surcharge if paid after 30 days

4. No discount, full amount due in 30 days

The correct answer is: A 2% discount if paid by the 10th day of the month following purchase

The term "2/10 prox net 30" describes specific payment terms related to discounts and payment deadlines. The "2/10" portion means that there is a 2% discount available if the invoice is paid within 10 days from the end of the month in which the purchase was made. The "net 30" indicates that the full invoice amount is due within 30 days of the invoice date. This understanding of the term allows businesses to incentivize early payment while still allowing time for full payment. By paying within the specified period (10 days), customers can save money through the discount. This practice can help improve cash flow for the business and encourage prompt payment, benefiting both parties in the transaction. The clarity of the timing associated with this term is why it is commonly used in trade and service contracts to outline financial expectations and encourage timely payments by clients.