Discounting And Factoring Techniques

1. Discounting And Factoring Techniques

2. Introduction Discount in the general term is the reduction made from the amount of a bill in lieu of its immediate cash payment or in lieu of bulk purchases by a trader. Discount in lieu of cash payment is called cash discount. Discounts are reductions to a basic price of goods or services.

3. Origin of DISCOUNT Modification of French word décompter, from Old French word desconter, from Medieval Latin word discomputare, from Latin dis-+ computare to count. First Known Use: 1629

4. What is Discounting? The process of determining the present value of a payment or a stream of payments that is to be received in the future is called discounting. Given the time value of money, a dollar is worth more today than it would be worth tomorrow given its capacity to earn interest.

5. DEFINITIONS OF DISCOUNT “A reduction made from the gross amount or value of something” “A reduction made from a regular or list price,a proportionate deduction from a debt account usually made for cash or prompt payment “A deduction made for interest in advancing money upon or purchasing a bill or note not due”

6. Advantages of Offering Discounts • Attracts Customers • Increases Sales • Free Up Room • Reputation • Meet Goals • Improves Goodwill • Higher Consumer Sales

7. How to Calculate Discounts? Discounts can be anything from a few rupees off to a certain percentage off. If it is 10% off on a Rs.100 product then you would subtract Rs.10 from Rs.100 which is Rs.90. If it is 20% off on Rs.100, it would be Rs.80 Discounts are reductions to a basic price of goods or services.

8. Types of Discounts

9. Trade Discount A trade discountis the amount by which a manufacturer reduces the retail price of a product when it sells to a reseller, rather than to the end customer. Cash Discount A cash discount is an incentive that a seller offers to a buyer in return for paying a bill owed before the scheduled due date.

10. Examples • 2/10 net 30 - this means the buyer must pay within 30 days of the invoice date, but will receive a 2% discount if they pay within 10 days of the invoice date. • 2/15 net 40 ROG - this means the buyer must pay within 40 days of receipt of goods, but will receive a 2% discount if paid in 15 days of the invoice date. (ROG is short for "Receipt of goods.

11. Other Types of Discounts

12. What do you mean by Factoring? Factoring is the decomposition of an object (for example, a number, a polynomial, or a matrix) into a product of other objects, or factors, which when multiplied together give the original. To factor a number means to break it up into numbers that can be multiplied together to get the original number.

13. Aim of Factorization The aimof factoring is usually to reduce something to “basic building blocks”, such as numbers to prime numbers, or polynomials to irreducible polynomials. Factoring integers is covered by the fundamental theorem of arithmetic and factoring polynomials by the fundamental theorem of algebra. Viète's formulas relate the coefficients of a polynomial to its roots.

14. Factoring Methods

15. Greatest Common Factor A Common Factor is something you can divide each term of a polynomial by evenly. The Greatest Common Factor (GCF) is the largest common factor you can evenly divide each term of a polynomial by. Factoring by Grouping Factoring by grouping requires that you have four terms. What you want to do is group the terms into two groups of two terms each. The next step is to factor out the GCF in each set of parentheses.

16. Special Case Factoring There are some special cases for factoring that you just have to memorize. • a² -b² = (a+b)(a-b) Difference of Perfect Squares • a³+b³ = (a+b)(a²-ab+b²) Sum of Cubes • a³- b³ = (a-b)(a²+ab+b²) Difference of Cubes When you see that you have a two-term non-linear polynomial, check to see if it fits any of the formulas.