Asked by Jasmine Montero on Apr 29, 2024
Verified
Payables financing is costless during the prompt payment discount period.
Payables Financing
A form of short-term borrowing where a company finances its accounts payables through a third party.
Prompt Payment Discount
A discount offered to buyers for paying their invoices early, encouraging faster payments.
- Understand the impact of foregoing prompt payment discounts on interest rates for loans.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
True
Explanation :
Payables financing involves taking advantage of the prompt payment discount offered by a supplier to pay early and receive a discount. This discount essentially covers the cost of financing and makes it costless during the discount period. However, if the payment is made after the discount period, additional financing costs may apply.
Learning Objectives
- Understand the impact of foregoing prompt payment discounts on interest rates for loans.