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Cash discount, cash conversion cycle

1) Gouge-M is considering adding a cash discount to its credit terms. If Gouge-M offers 3 / 15 net 30 rather than its current net 30 policy, what annualized rate is the company charging customers who do not take the discount? Assume a 365-day year.

a. 7.526 percent
b. 37.629 percent
c. 70.874 percent
d. 75.258 percent
e. 376.29 percent

2) Pomegranate Computer Corp. is considering a substantial strategic initiative that will increase the payable period by 12 days, increase inventory turnover from 100 times per year to 170 times, and lengthen the average collection period from 3 days to 9 days. What will be the impact on Pomegranate's cash conversion cycle? (There are 365 days in a year)

a. reduction of 52 days
b. reduction of 19.5 days
c. reduction of 7.5 days
d. increase of 4.5 days
e. increase of 64 days

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Question 9
Gouge-M is considering adding a cash discount to its credit terms. If Gouge-M offers 3 / 15 net 30 rather than its current net 30 policy, what annualized rate is the company charging customers who do not take the discount? Assume a 365-day year.

a. 7.526 percent
b. 37.629 percent
c. 70.874 percent
d. 75.258 percent
e. 376.29 percent

Answer:
d. 75.258 percent

Discount= 3%
Discount period= 15 days
Period after which the account ...

Solution Summary

Answers to 2 multiple choice questions on Cash discount, cash conversion cycle.

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