Question

Rock Solid Concrete Company does not offer customers a cash discount for early payment of their accounts receivable. As a result, most customers wait to pay their bill on the last day before late penalties are charged. These customers apparently understand the:

Answer 1

Answer:

Time value of money

Explanation:

The reason is that the money invested today worth more tomorrow. If we have option to pay our supplier $5m after a year is more suitable option than paying him today. The reason is that the amount paid today will be worth $5m but if we pay our supplier after a year then in real terms we have paid the supplier less because money lost its worth by certain percentage during the year. So paying late makes the liability cheaper required their are no interest or other costs.