What is accretion of a discount?



In finance, accretion refers to the growth of value in an investment. For example, if you purchase a stock that is trading at $20 per share and the company reports earnings of $2 per share for the quarter, your stock's value would increase to $22 per share due to the accretion of the $2 per share earnings.

It is the increase in the value of an object due to the addition of more objects to the total pool of objects. This growth occurs when there is a decrease in the value of the initial object, and it can be seen as a positive event for buyers. When sellers offer discounts, buyers are more likely to purchase because they perceive that the total cost (or value) of the item is lower than it would have been if no discounts were offered.

How is accretion of a discount calculated?

When a business discounts an item, the discounted price is not the regular price. The discounted price is the price of the item after the discount has been applied. This process is called accretion of a discount. To calculate how much the discount has accreted, you need to know the original price of the item, and the discounted price. You also need to know how much money was spent on the item. The percentage that was spent on the item is called the conversion rate. The equation for accretion of a discount is −

Accretion of a Discount = Original Price - Discounted Price x Conversion Rate

When is accretion of a discount desirable?

The accretion of a discount is desirable when the cost of the good or service decreases over time. When a company discounts its goods or services, it gains customers by making the product or service cheaper than what its competitors are selling. The company then has an incentive to keep the price low, as customers will continue to buy the product or service even if it becomes less expensive in the long run.

When a company discounts its goods or services, it gains customers by making the product or service cheaper than what its competitors are selling. The company then has an incentive to keep the price low, as customers will continue to buy the product or service even if it becomes less expensive in the long run.

What are the consequences of not accreting a discount?

If you do not accrue a discount when purchasing an item, the vendor may mark the price of the product at a higher than discounted price in order to obtain a sale. Customers who purchase the product at this higher price may feel as though they're getting a better deal since the full amount of the purchase is being paid upfront. Vendors may also choose not to offer discounts on items that are frequently bought in bulk, as this would lead to increased prices for customers who only purchase small quantities of products.


Advertisements