Aging the Receivables Taking the Discount

AGING OF THE ACCOUNT
Days Outstanding	AMT ($)	%
1 to 30	61,000	61
31 to 60	20,000	20
61 to 90	10,000	10
91 to 180	9,000	9
TOTAL	100,000	100
Financing Gap		Days
Goods Ordered & Inventoried		45
Account Receivable		40
Payment to Suppliers		30
FINANCING GAP		55
Cost of Foregoing the Payable Discount
Disc/1 - Disc	365/(contract days - discount days)
For Ex.: 2/10 net 30 payment term on Invoice
2/98 x 365/20 = 37%
Recommendation: borrow at less than 37% and pay within the 10-day period.

Question 2: (a)What is the Financing gap below in days? The financial Gap is 55 days

(b) What is meant by the days above?

Financing Gap		Days
Goods Ordered & Inventoried		20
Account Receivable		30
Payment to Suppliers		50
FINANCING GAP?		55

ANS:

3. So your invoice states 3/15 net 60

What % could the business borrow at so that you would loose on taking the discount?

SOLN: ..