What is effective annual cost of firms current practice

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Reference no: EM131027073

justo Ltd buys on terms 1.5/10, net 30 days. It does not take discounts, but it typically pays 20 days after the invoice date, instead of waiting until Day30. Justso can borrow from the bank at a rate of 18% per annum.

(a) If justso is notaking discounts and is paying on Day 20, what is the effective annual cost of the firm's current practice, using a 360-day year?

(b) Please advise Justso Ltd on its cheapest course of action if the firm' suppliers do not take action on outstanding accounts unless they remain unpaid 80 days after the date of the invoice. Please back your advice up with appropriate calculations.

(c) please advise Justso Ltd on its cheapest course of action if the firm's suppliers take action on outstanding accounts when they remain unpaid at the start of the 31st day after the date of the invoice. Please back your advice up with appropriate calculations.

Reference no: EM131027073

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