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
Percentage cost of the discount
10y ago#1It 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.
Sorry Teacher, what I meant was 44% of what?
10y ago#3It 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.