Pips Limited is considering offering a cash settlement discount to its customers. Currently its annual sales...
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Pips Limited is considering offering a cash settlement discount to its customers. Currently its annual sales are $10m and its normal payment terms are 90 days. Customers will be able to take a 2% discount for payments after 10 days. Pips anticipates that 20% of customers will take the discount. Currently Pips has an overdraft on which it is paying 10% interest. Required Assess whether Pips should offer the discount. Pips Limited is considering offering a cash settlement discount to its customers. Currently its annual sales are $10m and its normal payment terms are 90 days. Customers will be able to take a 2% discount for payments after 10 days. Pips anticipates that 20% of customers will take the discount. Currently Pips has an overdraft on which it is paying 10% interest. Required Assess whether Pips should offer the discount.
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The key benefits of offering the discount are that it will encourage c... View the full answer
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