Imelda Corporation has been manufacturing oil exploration spares for a number of successful years. However, competition is becoming fierce and technological development requires an equipment modernization effort that requires $200,000 in new funding.

Several options are being considered to increase the funds available for such financing:

1. Provide a 1.5% discount if customers pay within 10 days and 2% within 5 days. The current terms are "net 40 days". It was stated that under the first policy 80% of customers would benefit while only 60% would benefit under the second policy.

2. Waive the vendor discount to defer payment up to the allowable limit.

3. Attempt to obtain a bank loan with an interest rate of 24%, knowing that the balance due is 20%.

It is useful to know that sales and purchases for the last fiscal year amounted to $3,000,000 and $1,800,000 respectively. Purchases and sales are evenly distributed throughout the year. Suppliers grant:

- The terms "3/10, net 30" for the 34 of the purchases.

- The terms "net 30" for the remaining quarter.

Balance sheet as of December 31, 2002

Bank	10 000$		Accounts Payable	150 000$
Accounts Receivable	290 000$		Bank loan	50 000$
Inventory	300 000$		Various	50 000$
Short-term assets	600 000$			250 000$

Long-term loan 300 000$

The company's income tax rate is 50%. We consider 360 days per year.

1. Explain what other financing structure would have been more favorable to a sustainable balance of the company's financial situation, particularly in terms of liquidity.