Question

If Mountain Home Clinic has a line of credit where they can borrow cash at 8%, when do they pay their Pillmore Supplies bill? Day 1,5,10,15 or 30 ? Why?

Answer 1

The Mountain Home Clinic will pay their Pillmore Supplies bill on Day 15. By delaying the payment, they can borrow cash from their line of credit for a shorter period, reducing interest costs.

Step-by-step explanation:

The Mountain Home Clinic will pay their Pillmore Supplies bill on Day 15. This is because it is common practice for businesses to have payment terms with their suppliers, typically ranging from 15 to 30 days.

Since the line of credit allows them to borrow cash at 8%, it is more beneficial for them to delay their payment for as long as possible. By delaying the payment to Day 15, they can borrow cash from the line of credit for 15 days at a lower interest rate compared to if they paid on Day 1 or 5.