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Settlement Discount VS Investing to determine which is more beneficial

Forums › ACCA Forums › General ACCA Forums › Settlement Discount VS Investing to determine which is more beneficial

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Kim Smith.
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  • September 26, 2023 at 2:55 am #692525
    flupsie
    Participant
    • Topics: 5
    • Replies: 6
    • ☆

    A supplier is offering an early settlement discount if invoice is settled a minimum of 8 days prior to the end of the month based on an int rate of 8% . if one invested the funds one would earn 6.5% Should one settle early or investment and settle the last day of the month

    Say the payment amount was 1,000,000, then the settlement would be (1,000,000*8%)/365*8 = 1,753.42

    When Investment the funds do I compute (1,000,000 x 6.5%) /365*8 so as to determine whether one should settle early or forgo the settlement discount and rather keep the funds invested and settle the last wotking day of the month ?

    September 26, 2023 at 8:10 am #692530
    Kim Smith
    Keymaster
    • Topics: 135
    • Replies: 8309
    • ☆☆☆☆☆

    This is the “general” forum – for non-exam-specific queries.

    If this is FM, you can ask a fellow student here https://opentuition.com/forum/acca-forums/acca-fm-financial-management-forums – or the tutor here https://opentuition.com/forum/ask-acca-tutor-forums/ask-the-tutor-acca-financial-management-fm-exams

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