Are cash discounts in the farm supply industry profitable?

Mike Bockhorn and Kim Harris
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Mike Bockhorn: Department of Agribusiness Economics at Southern Illinois University of Carbondale, Postal: Department of Agribusiness Economics at Southern Illinois University of Carbondale
Kim Harris: Department of Agribusiness Economics at Southern Illinois University of Carbondale, Postal: Department of Agribusiness Economics at Southern Illinois University of Carbondale

Agribusiness, 1989, vol. 5, issue 2, 87-94

Abstract: The profitability of cash discounts offered by farm supply firms in southern Illinois is determined using a net present value model. Results suggest that cash discounts may reduce the profitability of farm supply firms: Among the 33 agribusinesses whose cash discounts were analyzed, over one-half had unprofitable cash discounts. The average cost to the firms with unprofitable cash discounts was $38,800. Firms with profitable cash discount policies added, on average, about $67,600 to their firms' total profits. It was found that reducing cash discount rates is a major way to improve the profitability of cash discount policies.

Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:wly:agribz:v:5:y:1989:i:2:p:87-94

DOI: 10.1002/1520-6297(198903)5:2<87::AID-AGR2720050202>3.0.CO;2-6

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