Tubby Bubbles, Inc. is looking at a couple different ways to finance purchases. The following are some of the scenarios that Tubby is facing.
Bubbles purchased cost $15,000 per month. If Tubby is offered terms of 2/15, net 30, How much money can Tubby save on the order if it is paid sooner? What is the difference in due dates between the two terms offered on these purchases?
If Tubby goes to a new supplier, Bubbles will cost $17,500. However, the payment terms are 4/20, net 45. What would Tubby pay if it took the discount?
Compare the two payment agreements. Which one would you recommend for Tubby?