Asked Oct 26, 2019

Critically discuss the effect of increasing the amount paid upfront when corporations make capital purchases, focusing on the benefits and drawbacks


Expert Answer

Step 1

Capital purchases refer to the expenses a company makes for buying new equipments, improving long term assets (like fixed assets) or other expenses that can generate long term benefits for the company.

Step 2

Capital purchases are irreversible and involve hugh investments. Companies make necessary planning before making capital purchases.

Step 3

Benefits of increasing the upfront payments:
Increasing the amount paid upfront sometime fetches higher discounts to the companies during purchases, this reduces the overall capital expense (business costs). Increasing the upfront amount increases the possibility of obtaining better credit terms with the suppliers.
Paying higher upfront amount redu...

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