Mr.Hill,who runs a key-chain manufacturing unit,buys raw materials from his supplier during the first week of every month.The supplier's policy states that all payments need to be cleared within 50 days of buying the materials.This schedule ensures that Mr.Hill gets an extended period to make payments thus controlling when the payment is made.Which of the following strategies is Mr.Hill using to control cash outflow?

Question

Quizplus · Accepted Answer

Mr. Hill is timing the purchase of raw materials in order to control his cash outflow. By purchasing materials in the first week of the month and taking advantage of the supplier's payment policy, he is able to delay payment and manage his cash flow more effectively. Taking a consignment, offering trade discounts, and gaming the payment process (such as delaying payments without the supplier's knowledge) are all different strategies for managing cash flow, but they are not applicable in this scenario.

MrHill,who Runs a Key-Chain Manufacturing Unit,buys Raw Materials from His