Suppose one of the suppliers to Seattle Health System offers terms of $3/20,$ net $60.$

a$.$ When does the system have to pay its bills from this supplier?

b$.$ What is the approximate percentage cost of the costly trade credit offered by this supplier?

$($Assume $360$ days per year.$)$

ANSWER

a$.$

b$.$

Approximate $\%cost=\frac{\text{D}\text{i}\text{s}\text{c}\text{o}\text{u}\text{n}\text{t}\text{p}\text{e}\text{r}\text{c}\text{e}\text{n}\text{t}}{100-\text{D}\text{i}\text{s}\text{c}\text{o}\text{u}\text{n}\text{t}\text{p}\text{e}\text{r}\text{c}\text{e}\text{n}\text{t}}x\frac{360}{\text{D}\text{a}\text{y}\text{s}\text{c}\text{r}\text{e}\text{d}\text{i}\text{t}\text{r}\text{e}\text{c}\text{e}\text{l}\text{v}\text{e}\text{d}-\text{D}\text{i}\text{s}\text{c}\text{o}\text{u}\text{n}\text{t}\text{p}\text{e}\text{r}\text{i}\text{o}\text{d}}$

Discount percent

Days credit recelved

Days of free trade credit

Perlodic cost of trade credit

$3$ Number of discount periods per year

$4$ Approximate $\%$ cost