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Sir
We find Effective cost % of
Receivables
In order to see whther it’s worth offering an early settlement discount or obtaining a loan from the bankThen what about effective cost % of payables
What is happening here sirFor receivables it is not normally considering taking a loan from the bank – it is normally to compare the cost of offering a discount with the interest saved by reducing the overdraft.
For payables we compare the cost of delaying payment and therefore losing a discount with the cost saving on the overdraft by delaying payment.
This is explained in my free lectures on the management of receivables and of payables.
The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
So for payables we either take the advantage of discount given by our suppliers or delay the payment right sir
Thank you
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