Sie handelt den Verkaufspreis herunter.

Here it means she.

Why:

• sie = she
• sie = they
• Sie = formal you

But the verb form tells you which one fits:

• sie handelt = she negotiates / she bargains
• sie handeln = they negotiate
• Sie handeln = formal you negotiate

So Sie handelt can only be she negotiates. The capital S at the beginning of the sentence does not help, because the first word of every German sentence is capitalized anyway.

Herunterhandeln is a separable verb.

It is made of:

• handeln = to negotiate / bargain / deal
• herunter- = down

So etwas herunterhandeln means to negotiate something down.

In a main clause, the prefix separates:

• Sie handelt den Verkaufspreis herunter.

In the infinitive, it stays together:

• Sie versucht, den Verkaufspreis herunterzuhandeln.

And in the past participle:

• Sie hat den Verkaufspreis heruntergehandelt.

Because herunterhandeln is separable, and in a normal main clause German splits it:

• the conjugated verb goes to the usual verb position
• the prefix goes to the end

So:

• Sie = subject
• handelt = finite verb
• den Verkaufspreis = object
• herunter = separated prefix

That is standard German word order for separable verbs.

Because Verkaufspreis is the direct object of the verb, so it is in the accusative case.

The noun Verkaufspreis is masculine:

• nominative: der Verkaufspreis
• accusative: den Verkaufspreis

The sentence is answering What is she negotiating down?
Answer: den Verkaufspreis.

So the accusative is required.

Verkaufspreis is a compound noun:

• Verkauf = sale / selling
• Preis = price

So it means selling price, sale price, or sometimes asking price, depending on context.

German uses compound nouns very freely, so putting two nouns together like this is completely normal.

No. This is a false friend.

English to handle usually means something like manage, deal with, or touch/use with the hands.

German handeln usually means things like:

• to trade
• to deal
• to negotiate / bargain

In this sentence, it clearly has the idea of bargaining or negotiating because of herunter and the object den Verkaufspreis.

Yes, that is possible in everyday spoken German.

A few common variants are:

• Sie handelt den Verkaufspreis herunter.
  More standard / neutral
• Sie handelt den Preis herunter.
  Also standard
• Sie handelt den Preis runter.
  More colloquial

runter is a spoken-style short form of herunter.

So herunterhandeln and runterhandeln are very close in meaning, but herunter- sounds a bit more standard in careful written German.

It is present tense: third person singular.

The basic pattern is:

• ich handle
• du handelst
• sie/er/es handelt

In German, the present tense can cover several English ideas, depending on context:

• she negotiates the sale price down
• she is negotiating the sale price down
• sometimes even she will negotiate the sale price down

But without extra context, the straightforward reading is simple present.

Not in this sentence.

German handeln can sometimes mean to act, but that is usually in different structures, for example:

• Er handelt klug. = He acts wisely.
• Es handelt sich um... = It is about...

In Sie handelt den Verkaufspreis herunter, the structure tells you it means to negotiate/bargain:

• it has a direct object: den Verkaufspreis
• it has the separable prefix herunter-
• the whole expression means to negotiate something down

So acts would not fit here.

Yes, it is natural German.

It sounds like something you would say when talking about bargaining over a price, for example in sales, business, or buying a car or a house.

A very common shorter version would also be:

• Sie handelt den Preis herunter.

Using Verkaufspreis makes it a bit more specific and slightly more formal/business-like.