When Deciding Whether or Not to Take a Cash Discount

question 33

True/False

When deciding whether or not to take a cash discount, the cost of borrowing from a bank or other source should be compared to the cost of trade credit to determine if the cash discount should be taken.

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Definitions:

Dividends

Payments made by a corporation to its shareholder members, distributing a portion of the company’s earnings to investors.

Common Stock

Represents ownership shares in a corporation, giving holders voting rights and a share in the company's profits via dividends.

Liability

Any form of financial debt or obligation that an individual or company owes, which is recorded on the balance sheet.

Dividend Growth Model

A valuation method that forecasts the price of a stock by using predicted dividends and discounting them back to present value.