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Dear Teacher,
When it ia said that percentage cost of the discount for early settlement discount is 44%. What does it mean? I dont know 44% compared to what.
Thanks for answering meIt depends on the whole contact of the question.
However normally it would mean the interest cost per annum of offering a discount. You would then compare this with the rate of overdraft interest in order to decide whether or not the discount was worth offering.
I cover all this in my free lectures on the management of receivables.
The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
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