Decision Analysis of Two Financing Methods to Avoid the Destruction of Firm Capital Chain

Inventory impawn financing and delayed payments are two methods to avoid the situation of destroying the capital chain in supply chain. Because of uncertainty in market, there are several uncertain factors in these two financing measures, such as cash discount rate, inventory impawn financing rate, and lost sale penalty cost. These uncertain factors have an important impact to firm profit. As a consequence, it is difficult to decide which financing measure to select. To solve the problem, formula of firm profit under the methods of inventory impawn financing and delayed payments were derived first. Then, in three deferent uncertain conditions, affection on firm profit with uncertain factors was analyzed in two types of financing measures, and the guiding principles of selecting the financing methods to maximize firm profits were given.