Legal Definitions - cash discount

Definition: A cash discount is a reduction in the price of a product or service offered by a seller to a buyer who pays in cash or within a specified time period. It is a type of discount that encourages customers to pay quickly and helps sellers to improve their cash flow.

Example: A furniture store offers a 5% cash discount to customers who pay for their purchases in full at the time of purchase. For instance, if a customer buys a sofa set worth $1000 and pays in cash, they will only have to pay $950 (i.e., $1000 - 5% of $1000).

This example illustrates how a cash discount works. The seller offers a lower price to the buyer who pays in cash, which benefits both parties. The buyer saves money, and the seller gets paid faster, reducing the risk of bad debts and improving their cash flow.