Trade credit, What is Trade credit, Meaning of Trade credit, Advantages Trade credit

1. TRADE CREDIT

2. WHAT IS A TRADE CREDIT
• A trade credit is an agreement where a customer can
purchase goods on account (without paying cash), paying
the suppliers at a later date. Usually when the goods
delivered, a trade credit given for a specific number of days -
30, 60 or 90. jewelry businesses sometimes extend credit to
180 days or longer.
• Trade credit is essentially a credit a company gives to
another for purchases of goods & services

3. MEANING OF TRADE CREDIT
• Trade credit is an important external source of working
capital financing. It is a short term credit extended by
suppliers of goods & services in the normal course of
business, to a buyer in order to enhance sales.
• Trade credit arises when a supplier of goods & services
allows customers to pay for goods and services at a later
date. Cash is not immediately paid & deferral of payment
represents a source of finance.

4. ADVANTAGES OF TRADE CREDIT
•It is easy and automatic sources of short term
finance.
•It reduces the capital requirement.
•It helps the business focus on core activities.
•It does not require any negotiation or formal
agreement