Answered: The early payment discount being…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The early payment discount being considered in change 3 is “3/20 net 90”. Calculate the effective annualised cost of the discount
If Sphinx can borrow funds in the short-term money markets at 20%, should the trade discount be taken by Sphinx?

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

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