FIN515 Homework7 Kera Breisch

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Journal of Accounting Education, 2000

Conceptually, cash discounts oered but not taken represent interest expense to the buyer and interest revenue to the seller. This paper identi®es inconsistencies among seven intermediate accounting textbooks regarding how to express the cost of cash discounts as an eective annual rate. A correct formula for computing the eective annual rate on cash discounts is derived and compared with textbook formulas. Appendix A generalizes the correct formula to noninterest-bearing notes and notes receivable discounted at a bank.

2019

Economic Affairs, 2018

The financial systems of the day demand greater speed and accuracy which has been provided by digitalization delivered though computers. However, iterative programmes are no better than generalized formulae in saving time and money. This necessitates efforts in finding generalized mathematical formulae. This paper attempts to derive mathematical expression for various repayment plans in general. The generalized expressions derived have been further made use in comparing the cost effectiveness of repayment plans in long run. The straight end repayment plan remains the costliest plan with partial repayment plan being less costly regardless of interest rate and repayment term involved. The cost effectiveness of other plans depends on rate of interest and term of repayment.

The Yugoslav Journal of Operations …, 2012

Trade credit financing has become a powerful tool to improve sales & profit in an industry. In general, a supplier/retailer frequently offers trade credit to its credit risk downstream member in order to stimulate their respective sales. This trade credit may either be full or partial depending upon the past profile of the downstream member. Partial trade credit may be offered by the supplier/retailer to their credit risk downstream member who must pay a portion of the purchase amount at the time of placing an order and then receives a permissible delay on the rest of the outstanding amount to avoid nonpayment risks. The present study investigates the retailer's inventory problem under partial trade credit financing for two echelon supply chain where the supplier, as well as the retailer, offers partial trade credit to the subsequent downstream member. An algebraic approach has been applied for finding the retailer's optimal ordering policy under minimizing the annual total relevant cost. Results have been validated with the help of examples followed by comprehensive sensitivity analysis. MSC: C. K. Jaggi, and M. Verma / Two Echelon Partial Trade Credit 2 dealing with a range of inventory models under one-echelon trade credit have appeared in various journals. Goyal [4] established a single-item inventory model under permissible delay in payments when selling price equals the purchase cost. Further, Aggarwal and Jaggi [1] considered the inventory model with an exponential deterioration rate under the condition of permissible delay in payments. Jamal et.al [18] further generalized the model with shortages. Chung [3] developed an alternative approach to determine the economic order quantity under permissible delay in payments. Teng [20] amended Goyal's [4] model by considering the difference between selling price and purchasing cost.

2006

Measurement in financial accounting often requires determining an interest rate to discount future cash flows. One example is the International Accounting Standard (IAS)36 Impairment of assets. IAS 36´s impairment test requires determining a value in use (a present value). The Appendix A to the standard gives some guidance on how to determine a suitable discount rate. In this paper, we

European Journal of Operational Research, 2015

In today's competitive markets, most firms in United Kingdom and United States offer their products on trade credit to stimulate sales and reduce inventory. Trade credit is calculated based on time value of money on the purchase cost (i.e., discounted cash flow analysis). Recently, many researchers use discounted cash flow analysis only on the purchase cost but not on the revenue (which is significantly larger than the purchase cost) and the other costs. For a sound and rigorous analysis, we should use discounted cash flow analysis on revenue and costs. In addition, expiration date for a deteriorating item (e.g., bread, milk, and meat) is an important factor in consumer's purchase decision. However, little attention has been paid to the effect of expiration date. Hence, in this paper, we establish a supplier-retailer-customer supply chain model in which: (a) the retailer receives an upstream trade credit from the supplier while grants a downstream trade credit to customers, (b) the deterioration rate is non-decreasing over time and near 100 percent particularly close to its expiration date, and (c) discounted cash flow analysis is adopted for calculating all relevant factors: revenue and costs. The proposed model is an extension of more than 20 previous papers. We then demonstrate that the retailer's optimal credit period and cycle time not only exist but also are unique. Thus, the search of the optimal solution reduces to a local one. Finally, we run several numerical examples to illustrate the problem and gain managerial insights.