Question

Explain the following term/concept.

Trade credit

What is Trade Credit?

What do you understand by Trade Credit?

Answer 1

• Trade Credit refers to the facilities or credit extended by the manufacturer, wholesalers, and suppliers of goods to the purchaser, who receives payment after the credit period from the date of purchase. Manufacturers, wholesalers, and suppliers of goods or materials are called Trade Creditors’.
• It is a short-term credit provided by one business to another for purchasing goods or services, typically lasting 30 to 90 days.
• This practice is done by a business concern with the intention to increase its sales or turnover, generate additional business, and maintain good relations with the purchasers.