A large retailer obtains merchandise under the credit terms of 1/10, net 35, but routinely takes...

A large retailer obtains merchandise under the credit terms of 1/10, net 35, but routinely takes 55 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places.

Solutions

Expert Solution

Effective Cost of Trade Credit = [1 + (Disc.%/100 - Disc.%)]^[365 / (Days Credit Outstanding – Discount Period)] - 1

Effective Cost of Trade Credit = [1 + (1/99)]^[365 / (55 - 10)] - 1

Effective Cost of Trade Credit = 0.0849 or 8.49%

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

A large retailer obtains merchandise under the credit terms of 3/10, net 35, but routinely takes...

A large retailer obtains merchandise under the credit terms of 3/10, net 35, but routinely takes 50 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.

A large retailer obtains merchandise under the credit terms of 3/10, net 30, but routinely takes...

A large retailer obtains merchandise under the credit terms of 3/10, net 30, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.

A large retailer obtains merchandise under the credit terms of 1/15, net 30, but routinely takes...

A large retailer obtains merchandise under the credit terms of 1/15, net 30, but routinely takes 50 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places.

A large retailer obtains merchandise under the credit terms of 1/20, net 30, but routinely takes...

A large retailer obtains merchandise under the credit terms of 1/20, net 30, but routinely takes 50 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.

A large retailer obtains merchandise under the credit terms of 1/15, net 40, but routinely takes...

A large retailer obtains merchandise under the credit terms of 1/15, net 40, but routinely takes 55 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.

A large retailer obtains merchandise under the credit terms of 3/20, net 45, but routinely takes...

A large retailer obtains merchandise under the credit terms of 3/20, net 45, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.

A large retailer obtains merchandise under the credit terms of 2/15, net 45, but routinely takes...

A large retailer obtains merchandise under the credit terms of 2/15, net 45, but routinely takes 55 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.

A large retailer obtains merchandise under the credit terms of 2/15, net 30, but routinely takes 60 days to pay its bills.

Cost of Trade CreditA large retailer obtains merchandise under the credit terms of 2/15, net 30, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.%

Problem 16-04 Cost of Trade Credit A large retailer obtains merchandise under the credit terms of...

Problem 16-04 Cost of Trade Credit A large retailer obtains merchandise under the credit terms of 3/20, net 45, but routinely takes 50 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places. %?

Alumco sells product on account under credit terms of 1% / 10 / net 30. Indicate...

Alumco sells product on account under credit terms of 1% / 10 / net 30. Indicate whether each of the following account will receive a debit (DR) or credit (CR) or no entry (NE) when a customer pays its bill within the discount period: Cost of Goods Sold Accounts Receivable Discounts Returns and Allowances Revenue

Subjects