Assignment on working capital management

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Working Capital Management

Answer the following questions related to working capital management:

a) PT Solusindo Nusantara, a company with no liquidity problems, always pays its suppliers in full 45 days after the invoice even though they offer a 4% discount if the company pays in 10 days (4/10 net 45). Explain using the effective cost concept, why this is not good working capital management.

b) Pizza Club is thinking about financing the purchase of a delivery van with a useful life on 10 years using a 3-year loan from the bank because it is cheaper than a 10-year one? Would this be a good idea?

c) Which one of the following credit-terms would be the best for a company?

a. 3/10 net 50

b. 2/10 net 70

c. 4/20 net 45

d. 6/15 net 95

Reference no: EM132431274

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