Ally Manufacturing Has an Average Accounts Payable Balance of $420,000

question 74

Multiple Choice

Ally Manufacturing has an average accounts payable balance of $420,000. Its average annual cost of goods sold is $10,220,000. It receives terms of 2/15 net 30 from its suppliers. Is Ally managing its accounts payables well?

• A) Yes, since it, on average, chooses not to take the discount, but pays when payment is due.
• B) Yes, since it, on average, takes the discount, and pays at the end of the discount period.
• C) Yes, since it, on average, stretches payment beyond the due payment date.
• D) No, since it, on average, does not take advantage of the discount period and pays well before payment is due.

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Definitions:

Interest Payments

The amount paid by a borrower to a lender as a charge for the use of borrowed money, typically expressed as an annual percentage of the principal.

National Debt

The total amount of money that a country's government has borrowed, typically as a result of budget deficits, and is yet to repay.

Progressive

Referring to a tax system in which the tax rate increases as the taxable amount increases, often aimed at reducing income inequality.

Governs Least

A principle often associated with libertarianism, suggesting that the best government is one that governs the least, emphasizing minimal state intervention in personal and economic matters.