HP 10bII+ Financial Jæj¡, Gæjjgj¡, Dæjds¡, YÆJSjV¡ VÆGVd¡, Cost of Not Taking a Cash Discount

Table 13-3 Calculating the sales estimates for years six and seven

KeysDisplay Description

\t	0.00	Clears statistics registers.
JÆJ::::¡		that year.
	1.00	Enters first year and sales for
GÆJJGJ:¡	2.00	Enters second year’s data.
DÆJD:S:¡	3.00	Continues data entry.
YÆJS:jV¡	4.00
VÆG:Vd:¡	5.00
S\W	22,000.50	Estimates sales for year six.
j\W	24,605.00	Estimates sales for year seven.

Cost of Not Taking a Cash Discount

A cash discount gives a buyer a reduction in price if the payment is made within a specified time period. For example, “2/10, NET/30” means that the buyer can deduct 2 percent if payment is made within 10 days. If payment is not made within 10 days, the full amount must be paid by the 30th day.

You can use the equation shown below to calculate the cost of failing to take the cash discount. The cost is calculated as an annual interest rate charged for delaying payment.

COST% =	DISC% ⋅ 360 ⋅ 100
	(-------------------------------------------------------------------------------------------------------------------------------------------(100– DISC%) ⋅ (TOTAL DAYS – DISC DAYS))-

DISC% is the discount percent if the payment is made early. TOTAL DAYS is the total number of days until the bill must be paid. DISC DAYS is the number of days for which the discount is available.

Example

You receive a bill with the credit terms 2/10, NET/30. What is the cost of not taking the cash discount?

138 Additional Examples