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Question
Justify the following statement.
Trade credit is not cash loan.
Solution
Justification:
- Trade Credit refers to the facilities or credit extended by the manufacturer, wholesalers, and suppliers of goods to the purchaser but receives payment after the credit period from the date of purchase.
- Manufacturer, wholesalers, and suppliers of goods or materials are called "Trade Creditors'
- Trade credit is not a cash loan. It results from a credit sale of goods/services, which has to be paid at a future date after the sales take place.
- This practice is done by a business concern with an intention to increase its sales or turnover, generate additional business and maintain a good relationship with the purchasers.
Thus, it is rightly justified that, trade credit is not a cash loan.
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RELATED QUESTIONS
Write a word or a term or a phrase which can substitute the following statement.
Credit extended by the suppliers with an intention to increase their sales.
State whether the following statement is true or false.
Trade credit is major source of long term finance.
Complete the sentence.
When goods are delivered by supplier to customer on basis of deferred payment it is called as ______
Select the correct option from the bracket.
|
Group 'A' |
Group B' |
|
a) Equity shares |
1) ____________ |
|
b) ____________ |
2) Dividend at fixed rate |
|
c) Debentures |
3) ____________ |
|
d) ____________ |
4) Accumulated corporate profit |
|
e) Public Deposit |
5) ____________ |
(Fluctuating rate of dividend, Preference shares, Interest at fixed rate, Retained earnings, Short term loan)
Explain the following term/concept.
Trade credit
Answer in brief.
What is trade credit?
Justify the following statement.
Trade credit is the soul of business.
