CH7 MANAGING PAYABLES AND ACRUALS
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Transcript of CH7 MANAGING PAYABLES AND ACRUALS
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STELLA
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a c c o u nt
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CASH
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SeasonalDating
2/10, net
30, dating
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The CF Timeline A/P
Purchase Date Cash Discount Date Credit Date
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IP = Invoice PriceDD
= Number of das that!ament is delaedfrom date of
!urchaseDP = Discount Period
CP = Credit Period
d = Discount rate
" = Annual o!!ortunitrate
= Annual borro#ingrate
fe = Annual fee and
bk
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Purchase Date Cash Discount Date Credit Date
( ) ( )[ ]{ }
( ) DP DDif
k DDd IP NPV
≤
×+−×= 365/1/1
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Purchase Date Cash Discount Date Credit Date
( )[ ]{ }
( )CP DD DP if
k DD IP NPV
≤<
×+= 365/1/
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Cash Discount Date Credit Date
( ) ( )[ ] ( )[ ]{ }
( )CP DDif
k DD feeCP DD IP NPV
>
×+×−+×= 365/1/365/1
A$TE%Credit Date
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( ) ( ) ( )[ ]365/1/1 k DP CP IP d IP ×−+
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( )[ ] ( )[ ] DP CP d d k b
−×−< /3651/
Pin'am "e ban"& E hi d Th
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Ethics and ThePament
Decision
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)(NIT(%IN, theACC(-NT PA*A.LE.ALANCE
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Month Purchase Jan Feb March April May June
Jan $100 $50 $15
Feb 120 60 $18
Marc 100 50
Apr 80 $15
May 60 40 $12June 70 30 9
Total payables NA $75 $68 $55 $42 $35
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#ages
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Summar
A cash discount should be ta"en#hen the investment/borro#ing rateis less than the annuali0ed discountrate(ther#ise1 !a at the end of thecredit !eriodPament should not be stretched
!ast the credit !eriod The balance fraction monitoringmethod is !referred over the!aables turnover method since
turnover is in2uenced b !urchasing
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