Question

18. Trade credit is:

1. the process of checking actual performance against plans to ensure that desired financial results occur for a company
2. a company’s strategies for reaching some future financial position based on its credit rating and position in the industry
3. rules governing a company’s extension of credit to customers
4. the granting of credit by one company to another company that purchases products or services
5. the management of cash inflows and outflows to ensure adequate funds for purchases and the productive use of excess funds

Answer 1

Sol:

Trade credit is (the granting of credit by one company to another company that purchases products or services)

Trade credit is the credit extended by one company to another company who facilitate buy now and pay later. Any time the buying company can take delivery of products, goods and services without paying cash on the spot, it is using trade credit. It is an agreement or understanding between the companies engaged in business with each other, that allows the exchange of goods and services without any immediate payment. When the seller of goods or service allows the buyer to pay for the goods or service at a later date, the seller is said to extend credit to the buyer. It is commonly used by companies as a source of short-term financing.