Brembo, an Italian automotive braking-systems supplier, has three alternative carbon ceramic suppliers, all of which offer different credit terms. Except for the different credit terms, their products are identical. The credit terms offered by these suppliers are shown in the following table. (Note: Assume a 365-day year.) a.Calculate the approximate cost of giving up the cash discount from each supplier. b.If the firm needs short-term funds, which are currently available from Banca Mediolanum at 9%, and if each of the suppliers is viewed separately, which of the suppliers’ cash discounts should the firm give up? Explain why. c.Now assume tfirm is required to maintain a compensatinghe firm could stretch by 20 days the accounts payable (net periods only from the supplier, Nordex. What impact, if any, would that have on your answer in part b relative to this supplier?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Brembo, an Italian automotive braking-systems supplier, has three alternative carbon ceramic suppliers, all of which offer different credit terms. Except for the different credit terms, their products are identical. The credit terms offered by these suppliers are shown in the following table. (Note: Assume a 365-day year.)
a.Calculate the approximate cost of giving up the cash discount from each supplier.
b.If the firm needs short-term funds, which are currently available from Banca Mediolanum at 9%, and if each of the suppliers is viewed separately, which of the suppliers’ cash discounts should the firm give up? Explain why.
c.Now assume tfirm is required to maintain a compensatinghe firm could stretch by 20 days the accounts payable (net periods only from the supplier, Nordex. What impact, if any, would that have on your answer in part b relative to this supplier?
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