. With regard to accounts payable:Explain (including computations) the rationale of taking a cash discount, such as 4/8, n/30. Assume a purchase of $1,000,000.Additionally, determine the approximate balance of accounts payable, if a company stretches its payables to 40 days and on average, they make purchases of $1,000,000 per day from their vendors.

Discount Terms (4/8, n/30):4/8 means a 4% cash discount is offered if payment is made within 8 days,…

Answered: With regard to accounts payable:…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 17P

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. With regard to accounts payable:

Explain (including computations) the rationale of taking a cash discount, such as 4/8, n/30. Assume a purchase of $1,000,000.
Additionally, determine the approximate balance of accounts payable, if a company stretches its payables to 40 days and on average, they make purchases of $1,000,000 per day from their vendors.

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