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:

Financial Calculation

The process of determining financial figures, often involving interest, cash flows, investments, margins, and returns analysis.

Percentage

A part or portion of a whole, expressed as a fraction of 100, used to quantify relative differences or changes.

Daily Interest

The interest amount calculated on the principal amount on a daily basis.

Exponential Notation

A mathematical way to write numbers using bases and exponents.