Your company’s annual material purchases are $6,000,000 (evenly spread out over 365 days). Currently your accounts payable clerk sends in each payment after 20 days. However you have determined that payments sent out after 30 days will stay make it in time to your supplier to meet the 35 net day payment terms. Your company’s annual cost of borrowing is 10%. How much money can you save by sending payments after 30 days?

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Heres how to calculate the potential savings from changing your payment terms Step 1 Calculate the a... View the full answer