leadcfa

@ chuckrox8 the ST borrowing formula is incredibly easy.

[ 1+ ( discount / 1 - discount ) ] ^ 365/#days past cutoff

so if its 2/10 net 30 and u pay on day 25. Day 10 is your cutoff here.

[1 + (0.02/0.98) ]^365/15 - 1

= 1.634 - 1 = 0.634

So the annualized cost savings forgone were 63.4%!! this is why its always advantageous to take advantage of trade payables.

The cost as of day 11 goes up very very high, then by day 30 its lower but still very high. The logic is intuitive, if you are offered 2/10 net 30 and you dont pay by day 10, you would never pay somebody on day 11, you would always wait until day 30 because for those extra 20 days, you could earn interest.