How much can Y deduct from the bill if Y pays

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Questions -

Q1. What are the trade-offs involved in the decision of how much inventory the firm should carry? In what way does the cash manager face a similar trade-off?

Q2. Company X sells on a 1/30, net 60 basis. Customer Y buys goods invoiced at $1,000.

a. How much can Y deduct from the bill if Y pays on day 30?

b. What is the effective annual rate of interest if Y pays on the due date rather than on day 30?

Q3. How would you expect payment terms to change if:

a. The goods are perishable.

b. The goods are not rapidly resold.

c. The goods are sold to high-risk firms.

Reference no: EM132955331

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