A firms current working capital needs amount to $1,000,000. Their supplier grants credit terms of...
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Accounting
- A firms current working capital needs amount to $1,000,000. Their supplier grants credit terms of 2/10, net 35. The manager believes that funds will not be available to take advantage of discount. He she believes that there is even a possibility that he/she may not have funds until 25 days past the net date.
A very friendly banker has offered to lend the firm funds at a rate of 15% with a 10% compensating balances. Should he/she borrow the funds and take the discount or should she/he pay when funds become available?
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