If a firm chooses to take a cash discount, it should

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If a firm chooses to take a cash discount, it should pay on the last day of the discount period. This allows the firm to maximize its cash flow by holding onto the funds for as long as possible while also taking advantage of the discount offered. Paying as soon as possible or on the last day of the credit period would not maximize the benefit of the discount. Taking the discount no matter when the firm actually pays could result in missed opportunities to invest the funds elsewhere for a higher return.

If a Firm Chooses to Take a Cash Discount, It