320 db4 - unable to repay the debt and now the lender will...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Stretching account payables is the postponing of payments beyond the credit period. “By delaying bill payments as long as possible without damaging the firm’s credit, companies gets interest-free loans from suppliers” (Gitman, p 550). Advantages can be convenience and availability of trade credit and a greater flexibility as a means of financing. In reading different articles about stretching accounts payable, I see that this is done more with short term credits than long term credits. With short term credits you seem to have more flexibility. There are disadvantages when you stretch account payables. A vendor might consider you being a slow payer and eventually inquire that the company make payments on time. You can get late payment penalties or interest and deterioration in credit rating. A company can borrow too heavily on its short-term credits, that it is
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: unable to repay the debt and now the lender will not extend the credit to repay the loan and company is force to file bankruptcy. There are advantages of early payment which often work out to be more profitable than any other way you can invest your dollars. “Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest” (NIV, Matthew 25:27). You walk a thin line when paying bills late. You should never do anything to jeopardize the relationship between you and the vendors. References Gitman, Lawrence J. (2009). Principles of managerial finance brief. Pearson Prentice Hall, Boston, MA. Short-Term Financing. Chapter 11. Retrieved 3 December 2009 from: htpp://wps.pearson.co.uk/wps/media/objects/1669/1710030/0273685988_ch11.ppt...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern