Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN: 9781285595047
Author: Weil
Publisher: Cengage
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Cost of Trade Credit
Grunewald Industries sells on terms of 3/10, net 40. Gross sales last year were $4,161,000 and accounts receivable averaged $370,500. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers? (Hint: Calculate daily sales based on a 365-day year, calculate the average receivables for discount customers, and then find the DSO for the nondiscount customers.) Do not round intermediate calculations. Round your answers to two decimal places.
1.) Effective cost of trade credit:
Explain how an increase in interest rates by a central bank could affect bond prices and stock market performance. Explanation.
What is the purpose of diversification in an investment portfolio, and how does it reduce risk?
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