You Have Received an Email from a New Accounting Client,Jamal

question 113

Essay

You have received an email from a new accounting client,Jamal Parker,who has just started a new business.Jamal would like you to explain whether it is really that beneficial for him to take advantage of a 2/10,net 30 discount offered by one of his suppliers,given his limited cash flow.In a memo,explain to him why this is or is not a sound financial move for his new company.Most firms attempt to pay their accounts payable within the discount period to take advantage of the discount.Why is that normally a sound financial move?

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Definitions:

Tender of Payment

An offer to pay a debt or obligation by providing money or goods to the owed party.

Tender of Payment

The act of offering to pay a debt or an obligation, usually by offering the exact amount due in a legally recognized form.

Legal Tender

Money that may be offered legally in satisfaction of a debt and that must be accepted by a creditor when offered.

Buyer

An individual or entity that purchases goods or services.