The cost of giving up cash discount for each supplier. Introduction: Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.

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Answer 1

Question

Chapter 16, Problem 16.1STP

a)

Summary Introduction

To determine: The cost of giving up cash discount for each supplier.

Introduction:

Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.

b)

Summary Introduction

To discuss: Whether it is better to give up the discount or take the discount and borrow from a bank when the firm needs short-term financing.

Introduction:

An external type of financing that have a shorter time span for repaying the loan back is termed as short-term financing. This type of financing has less interest rate as compared to the long-term financing. Every company relies on short-term financing from external sources.

c)

Summary Introduction

To discuss: The impact when the firm can stretch its accounts payable by 20 days from supplier Z.

Introduction:

A process wherein the firm is delaying on the payment of accounts payable for a longer period is termed as stretching accounts payable. This type of process will not damage the credit rating of the firm. Stretching accounts payable can decrease the implicit cost for offering discounts. Therefore, this is effect on the cost of providing discount.

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Cash discount versus loan The Wood Connection decides to offer cash discounts to its regular credit customers, provided that the credit customers have a proven track record of on-time payment. The Wood Connection is offering Monkey Suppliers a discount on its credit purchases. The credit term offered is 2/10 net 60. Should Monkey Suppliers take the discount if a short-term loan can be obtained at 9%? (Note: Assume a 365-day year.)

Answer 2

Question

Chapter 16, Problem 16.1STP

a)

Summary Introduction

To determine: The cost of giving up cash discount for each supplier.

Introduction:

Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.

b)

Summary Introduction

To discuss: Whether it is better to give up the discount or take the discount and borrow from a bank when the firm needs short-term financing.

Introduction:

An external type of financing that have a shorter time span for repaying the loan back is termed as short-term financing. This type of financing has less interest rate as compared to the long-term financing. Every company relies on short-term financing from external sources.

c)

Summary Introduction

To discuss: The impact when the firm can stretch its accounts payable by 20 days from supplier Z.

Introduction:

A process wherein the firm is delaying on the payment of accounts payable for a longer period is termed as stretching accounts payable. This type of process will not damage the credit rating of the firm. Stretching accounts payable can decrease the implicit cost for offering discounts. Therefore, this is effect on the cost of providing discount.

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Answer 3

Question

Chapter 16, Problem 16.1STP

a)

Summary Introduction

To determine: The cost of giving up cash discount for each supplier.

Introduction:

Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.

b)

Summary Introduction

To discuss: Whether it is better to give up the discount or take the discount and borrow from a bank when the firm needs short-term financing.

Introduction:

An external type of financing that have a shorter time span for repaying the loan back is termed as short-term financing. This type of financing has less interest rate as compared to the long-term financing. Every company relies on short-term financing from external sources.

c)

Summary Introduction

To discuss: The impact when the firm can stretch its accounts payable by 20 days from supplier Z.

Introduction:

A process wherein the firm is delaying on the payment of accounts payable for a longer period is termed as stretching accounts payable. This type of process will not damage the credit rating of the firm. Stretching accounts payable can decrease the implicit cost for offering discounts. Therefore, this is effect on the cost of providing discount.

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Answer 4

Question

Chapter 16, Problem 16.1STP

a)

Summary Introduction

To determine: The cost of giving up cash discount for each supplier.

Introduction:

Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.

b)

Summary Introduction

To discuss: Whether it is better to give up the discount or take the discount and borrow from a bank when the firm needs short-term financing.

Introduction:

An external type of financing that have a shorter time span for repaying the loan back is termed as short-term financing. This type of financing has less interest rate as compared to the long-term financing. Every company relies on short-term financing from external sources.

c)

Summary Introduction

To discuss: The impact when the firm can stretch its accounts payable by 20 days from supplier Z.

Introduction:

A process wherein the firm is delaying on the payment of accounts payable for a longer period is termed as stretching accounts payable. This type of process will not damage the credit rating of the firm. Stretching accounts payable can decrease the implicit cost for offering discounts. Therefore, this is effect on the cost of providing discount.

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Answer 5

Chapter 16, Problem 16.1STP

a)

Summary Introduction

To determine: The cost of giving up cash discount for each supplier.

Introduction:

Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.

b)

Summary Introduction

To discuss: Whether it is better to give up the discount or take the discount and borrow from a bank when the firm needs short-term financing.

Introduction:

An external type of financing that have a shorter time span for repaying the loan back is termed as short-term financing. This type of financing has less interest rate as compared to the long-term financing. Every company relies on short-term financing from external sources.

c)

Summary Introduction

To discuss: The impact when the firm can stretch its accounts payable by 20 days from supplier Z.

Introduction:

A process wherein the firm is delaying on the payment of accounts payable for a longer period is termed as stretching accounts payable. This type of process will not damage the credit rating of the firm. Stretching accounts payable can decrease the implicit cost for offering discounts. Therefore, this is effect on the cost of providing discount.

Answer 6

Chapter 16, Problem 16.1STP

a)

Summary Introduction

To determine: The cost of giving up cash discount for each supplier.

Introduction:

Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.

Answer 7

Chapter 16, Problem 16.1STP

a)

Summary Introduction

To determine: The cost of giving up cash discount for each supplier.

Introduction:

Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.

Answer 8

b)

Summary Introduction

To discuss: Whether it is better to give up the discount or take the discount and borrow from a bank when the firm needs short-term financing.

Introduction:

An external type of financing that have a shorter time span for repaying the loan back is termed as short-term financing. This type of financing has less interest rate as compared to the long-term financing. Every company relies on short-term financing from external sources.

Answer 9

b)

Summary Introduction

To discuss: Whether it is better to give up the discount or take the discount and borrow from a bank when the firm needs short-term financing.

Introduction:

An external type of financing that have a shorter time span for repaying the loan back is termed as short-term financing. This type of financing has less interest rate as compared to the long-term financing. Every company relies on short-term financing from external sources.

Answer 10

c)

Summary Introduction

To discuss: The impact when the firm can stretch its accounts payable by 20 days from supplier Z.

Introduction:

A process wherein the firm is delaying on the payment of accounts payable for a longer period is termed as stretching accounts payable. This type of process will not damage the credit rating of the firm. Stretching accounts payable can decrease the implicit cost for offering discounts. Therefore, this is effect on the cost of providing discount.

Answer 11

c)

Summary Introduction

To discuss: The impact when the firm can stretch its accounts payable by 20 days from supplier Z.

Introduction:

A process wherein the firm is delaying on the payment of accounts payable for a longer period is termed as stretching accounts payable. This type of process will not damage the credit rating of the firm. Stretching accounts payable can decrease the implicit cost for offering discounts. Therefore, this is effect on the cost of providing discount.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 16.1 - What are the two major sources of spontaneous...Ch. 16.1 - Prob. 16.2RQ Ch. 16.1 - Prob. 16.3RQ Ch. 16.2 - How is the prime rate of interest relevant to the...Ch. 16.2 - How does the effective annual rate differ between...Ch. 16.2 - What are the basic terms and characteristics of a...Ch. 16.2 - What is a line of credit? Describe each of the...Ch. 16.2 - What is a revolving credit agreement? How does...Ch. 16.2 - Prob. 16.9RQ Ch. 16.3 - Prob. 16.10RQ

The cost of giving up cash discount for each supplier. Introduction: Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.

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To determine: The cost of giving up cash discount for each supplier.

Introduction:

Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.

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Chapter 16 Solutions

The cost of giving up cash discount for each supplier. Introduction: Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.

Concept explainers

Videos

To determine: The cost of giving up cash discount for each supplier. Introduction: Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.

Want to see the full answer?

Chapter 16 Solutions

To determine: The cost of giving up cash discount for each supplier.

Introduction:

Credit term refers to customer’s ability to acquire goods before making payment, depends on the trust that payment will be paid in future.