You know that a firm may sometimes offer its customers a discount for early payment of accounts receivable.That is, a customer will be allowed to pay a lower amount if it makes its payments to you sooner.Your CFO has decided that your firm should begin offering a discount to its customers for early payment.Your research indicates that the size of discounts for early payment mostly range between 1%-5%. Your task is to determine the specific size of the discount that your firm should offer.

What factors would be most important in determining the size of the discount to offer to your customers for early payment?No calculations necessary.