Journal of Mathematics and Statistics

Optimal Ordering Policy with Stock-Dependent Demand Rate Under Retailer’s Two Stages Trade Credit Financing Using Discounted Cash Flow (DCF) Approach

Rakesh Prakash Tripathi, Harendra Singh and Neha Sang

DOI : 10.3844/jmssp.2015.75.87

Journal of Mathematics and Statistics

Volume 11, Issue 3

Pages 75-87

Abstract

Many researchers have assumed one stage trade credit financing. In this study, we considered two levels of trade credit policy using Discounted Cash Flow (DCF) approach. Demand rate is considered to be stock-dependent for the first level (credit demand) and constant for second level (cash demand). Mathematical models are derived under two different circumstances i.e., case I: The permissible delay period is less than or equal to the cycle time and case II: The permissible delay period is greater than or equal to the cycle time for settling the account. An algorithm is provided to determine the optimal order quantity and annual profit. In addition, numerical examples are presented to demonstrate the solution process. Finally, sensitivity analysis of the optimal solution is discussed with respect to different parameters.

Copyright

© 2015 Rakesh Prakash Tripathi, Harendra Singh and Neha Sang. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.