Aliber Co. sells on terms of 3/10, net 40. Total sales for the year are...
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Aliber Co. sells on terms of 3/10, net 40. Total sales for the year are $900,000. 30% of the customers pay on the 5th day and take discounts; the other 70% pay, on average, 65 days after their purchases, so they pay late. Assume a 365 day year for this problem, and also assume that both sales and accounts receivable are recorded net of discounts, regardless of whether or not customers take discounts. a. What should the nominal cost of trade credit be to those customers who do not take discounts, based on a 365 day year, assuming that they pay on time, even though they do not? b. What is the actual effective cost of trade credit to those customers who do not take discounts, based on a 365 day year, recognizing that they do not pay on time?
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