Which of the following statements is FALSE? Select one: a. The lower the discoun

Q: Which of the following statements is FALSE? Select one: a. The lower the discoun

FALSE statement is a. The lower the discount percentage offered, the greater the cost of forgoing the discount and using trade credit. This can be explained with followed example: Cost of trade credit: = (1+D÷(1-D))^(365÷n)-1 D is discount rate n is Number of days after discount period Effective interest rate 2% discount 34.31% (1+0.02/(1-0.02))^(365/25)-1 Effective interest rate 3% discount 56.00% (1+0.03/(1-0.03))^(365/25)-1

ID: 2751381 • Letter: W

Question

Which of the following statements is FALSE?

Select one:

a. The lower the discount percentage offered, the greater the cost of forgoing the discount and using trade credit.

b. A firm should choose to borrow using accounts payable only if trade credit is the cheapest source of funding.

c. A firm should always pay on the latest day allowed.

d. A firm should strive to keep its money working for it as long as possible without developing a bad relationship with its suppliers or engaging in unethical practices.

Explanation / Answer

FALSE statement is a. The lower the discount percentage offered, the greater the cost of forgoing the discount and using trade credit.

This can be explained with followed example:

Cost of trade credit: = (1+D÷(1-D))^(365÷n)-1 D is discount rate n is Number of days after discount period Effective interest rate 2% discount 34.31% (1+0.02/(1-0.02))^(365/25)-1 Effective interest rate 3% discount 56.00% (1+0.03/(1-0.03))^(365/25)-1

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Which of the following statements is FALSE? Select one: a. The lower the discoun

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