WebGross sales last year were $4,562,500 and accounts receivable averaged $437,500. 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 ... WebCash Cycle Formula. Operating Cycle - Accounts Payable Period ... so its effective cost of trade credit is 69.85%. terms of payment is 6/30 net 60 it means 6% discount is given if paid by 30th otherwise, it is payable by 60 days But it is paid actually after 5th day

The Cost of Trade Credit: A Net Present Value Perspective

WebA company can evaluate trade discounts using the following formula: ... Cost of trade credit (payment on day 50) = (1+0.02/0.98)^(365/40) - 1 = 20.24%. As you can see, after … Webeffective annual cost of trade credit shown in equation (1). As a further extension, if k p denotes the nominal annual interest rate, k p = 365[(1 + 01 1/365 - 1]. Therefore, equation (4) can be rewritten: The appendix shows first derivatives of equation (5) with respect to D, t d lia thomas supporters

fin mgmt 11 - e3 Flashcards Quizlet

WebCFIN chapter 16. Which of the following statements is correct? 1) Under normal conditions the shape of the yield curve implies that the interest cost of short-term debt is greater than that of long-term debt, although short-term debt has other advantages that make it desirable as a financing source. 2) Flexibility is an advantage of short-term ... WebOct 21, 2024 · If a large retailer obtains merchandise under the credit terms of 1/10, net 40, but routinely takes 50 days to pay its bills.The retailer's effective cost of trade credit … WebQuestion: (Cost of trade credit) Calculate the effective cost of the following trade credit terms when payment is made on the net due date. Use approximate cost-of-credit … lia thomas street clothes