Annual Percentage Interest Cost of Discount Not Taken   Prompt Payment Discount Amount 2.5 % Invoice has to be paid within how many days to qualify for the discount 10 Net amount of invoice to be paid within how many days 30 46.79%

Value of Prompt Payment Discounts over a 12 Month Period where: Average Monthly Credit Purchases are $100,000 Short Term Money Market Interest Rate 8.00% Prompt Payment Discount Value $24,740 Value of 2.5% Discount Invoice   Net Amount Discount Month 1 $100,000 $2,500 $ 97,500 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 $1,200,000 $30,000 $1,170,000 100,000 x .4679 x 20 x 12 / 365 = $30,660 …. Approximately = $30,000 shown above

Value if you could invest funds at 8% on the Short Term Money Market Interest Invoice Short Term Net Amount Money Mkt $100,000 $ 438 $99,562 $1,200,000 $5,260 $1,194,740 Now do the same calculation but at 46% - we get 100,000 x .46 x 20/365 = $2521

What does “Stretching” mean?

Next two slides are from the Commonwealth Bank Website 20/3/2014

Commercial Bills……

Accessing Commercial Bills with ANZ(note the turnover)?

A owes B $10,000 draws up a commercial bill - $10,000 payable to B in three months B decides he doesn’t want to wait 3 months and endorses the bill to C for $9800 The discount on the bill represents interest for C who should be paid $10000 on maturity of the bill by A If A doesn’t pay C can chase B for the funds and B will then have to chase A

The main difference between Promissory notes and Commercial Bills has to do with primary liability In the previous example A promises to pay B and A’s name is on the Promissory note – if B endorses the note to C – C has no come back on B – C will have to chase A only for the cash

Link to Short Video Advertisement on Factoring…. http://www.keyfactors.com.au/?gclid=CN7V84Hpn70CFcLvpAod-nQAtA

Normally considered a short term option

Equivalent to 8.27% annual interest rate - that is 2.04 / 90 * 365 = 8.27%

Have a look at the Dividend Interim Report Document

Company can redeem or buy back the debentures by offering cash or shares

June 2010 exam paper

Nov 2010 Paper

June 2011 exam..

June 2012 Exam …. Answer next slide ….