What is the firm's average accounts payable balance ? Aggarwal Inc. buys on terms of 2/15, net 45,and it always pays on the 45th day. The CFOcalculates that the average amount of costlytrade credit carried is $275,000. What is thefirm's average accounts payable balance?Assume a 365-day year.a. $330,000b. $366,667c. $409,750d. $412,500e. $359,333

Step 1: Define Trade CreditTrade credit is a way for a business to get money. A supplier gives…

Answered: Aggarwal Inc. buys on terms of 2/15,…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 6P

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What is the firm's average accounts payable balance?
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What the firms ACP ?
Kirk Development buys on terms of 2/15, net 60 days. It does not take discounts, and it typically pays on time, 60 days after the invoice date. Net purchases amount to $750,000 per year. On average, what is the dollar amount of total trade credit (costly + free) the firm receives during the year, i.e., what are its average accounts payable? (Assume a 365-day year, and note that purchases are net of discounts.)
Please see an attachment for details general accounting question
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