It is significant to finance with accounts payable because it is still obtaining finance, even with a delayed payout. The benefits of the significance of financing with accounts payable consist of improved cash flow, no interest, relationships with the supplier, and even increased flexibility of the financials. This shows that it has potential, and just like everything else, it has possible downsides. But it helps the business by allowing it to extend its payment terms and gain more appreciation from the consumers.

Explain (including computations) the rationale of taking a cash discount, such as 3/15, n/40.

Additionally, determine the approximate balance of accounts payable if a company stretches its payables to 50 days and on average, they make purchases of $1,000,000 per day from their vendors.

Explain what the stretching accomplishes if the vendors should be paid in 40 days.