CLEP Marketing Practice Exam 2026 – All-in-One Guide to Achieve Top Scores!

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What is the purpose of a cash discount?

Penalty for late payment

Encouragement to pay the bill quickly

A cash discount serves the purpose of encouraging prompt payment from customers. By offering a monetary incentive for paying bills quickly, businesses can improve their cash flow and reduce the risk of late payments. This type of discount is typically presented as a percentage off the total invoice amount if payment is made within a specified timeframe, effectively motivating customers to settle their accounts sooner.

In contrast, penalties for late payment are meant to deter tardiness and may involve additional charges, which do not align with the intent of a cash discount. Discounts for buying in bulk are strategies designed to promote larger purchases and are not related to the timing of payments. Similarly, a reduction in shipping costs pertains to logistics and delivery expenses, rather than payment incentives.

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Discounts for buying in bulk

Reduction in shipping costs

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