Comments

  1. avatar says

    First of all thanks for the lectures, they are very useful and valuable material.
    Could you please clarify which method to use in order to calculate the annual cost of discount taking example 1?
    -your method of 4% / 96% * 6=25% or
    -(1+4%/96%)^6-1=27.8% as written in Kaplan F9 Essential Text published in 2012

    Thanks,

  2. Avatar of aishaasad says

    hello,
    Please explain me the meaning of the following line
    Finding a total level of credit which can be offered is a matter of finding the least costly balance between enticing customers, whose use of credit entails considerable costs, and refusing opportunities for profitable sales
    Thnx in a anticipation

    • Avatar of John Moffat says

      What they are trying to say is the following:

      If you allow customers to take credit then you have the cost of chasing those who don’t pay, you lose interest while you are waiting for the money, and there is more risk of people not paying. The more credit you allow the more these costs will be.

      However, if you don’t allow customer to take credit then you risk them going to another supplier who does give them credit and therefore you risk losing sales.

      Hope that makes sense :-)

Leave a Reply