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3.Should the firm reduce or expand the amount of its bank borrowing?4.Evaluate Pearson’s management of accounts payable.The firm should use the discount received because it reduces the cost related with the acquisitions andincrease the net profit of the firm. Discount received helps the firm regulate its operations and pay theirdebts within 30 days to avoid pressure from their suppliers.(2/10, net 30), means that the supplier will offer the firm a 2 percent discount if it pays its bill in 10 days.If the firm doesn’t take that discount, then the bill is due in 30 days.To get the cost of not taking the discount is:Discount Percent/100 – Discount percent X 365/Days Credit is outstanding – Discount period = Cost ofNot Taking the Discount2/100 -2 *365/30 – 10 = 37.2%. This is the cost of not taking the discount by the firm and it can get aloan from the bank which is inexpensive.
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Balance Sheet,Debt,Generally Accepted Accounting Principles,Pearson Air Conditioning,Pearson Air Conditioning & Service