3. 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%

4. 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
$ ,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 x 20 x 12 / 365 = $30,660 …. Approximately = $30,000 shown above

5. Value if you could invest funds at 8% on the Short Term Money Market
Interest
Invoice
Short Term
Net
Amount
Money Mkt
$100,000 $
$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

6. What does “Stretching” mean?

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

12. Commercial Bills……

13. Accessing Commercial Bills with ANZ(note the turnover)?

16. 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

17. 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

19. Link to Short Video Advertisement on Factoring….

25. Normally considered a short term option

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

32. Have a look at the Dividend Interim Report Document

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

43. June 2010 exam paper

46. Nov 2010 Paper

51. June 2011 exam..

52. June 2012 Exam ….
Answer next slide ….