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Percentage cost of the discount

JJane10y ago
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 me
John MoffatJohn MoffatTutor10y ago#1
It 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.
JJane10y ago#2
Sorry Teacher, what I meant was 44% of what?
John MoffatJohn MoffatTutor10y ago#3
It isn't 44% of anything. It is an effective interest rate (and the lower the interest the better). Again I do suggest that you watch the lectures.
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