i. You watch Jim Cramer’s Mad Money and learn that a small technology stock is almost certain to increase sharply in price in the next 30 days. However, to make the funds available to purchase the stock for your firm you need to stretch your payables from the supplier by at least 30 days.
ii. Your boss has informed you that the size of your holiday bonus depends on your ability to increase your firm’s average payment period. Since the average payment period equals the accounts payable divided by average daily purchases, stretching payables will allow you to earn the bonus that you have been expecting.