Beyond inventory, credit policies are the other area of concern. As mentioned previously, J has been paying invoices late, even though doing so incurs a 1% penalty for late payment! Invoices are paid on the 60th day from receipt of goods. Incurring a 1% penalty for paying late cannot be the best policy. Terms from your vendor are 2/5 net 30 from receipt of goods. Traditionally, taking the discount is always the best option. The question is, what would that be worth over the course of a year? 

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To calculate the worth of taking the discount over the course of a year we need to compare the two p... View the full answer