Which of the following is an advantage of trade credit for a business?

Answer options:

Access to supplies without having to pay immediately.

Can raise money from equipment that is not being used.

Money does not need to be paid back.

Suppliers are responsible for repairs and maintenance.

How to approach this question

Analyse the term "trade credit". It is credit offered by a supplier (a "trade" partner). This means you can get their goods now and pay later. Option A directly describes this benefit. The other options describe different financial concepts.

Full Answer

A.Access to supplies without having to pay immediately.✓ Correct

The correct answer is A. Trade credit allows a business to obtain goods or services from a supplier and pay for them at a later date (e.g., in 30 or 60 days). This is a major advantage as it helps with cash flow.

Trade credit is a business-to-business (B2B) agreement in which a customer can purchase goods on account without paying cash up front, paying the supplier at a later scheduled date. The main advantage is that it allows the business to manage its cash flow more effectively by delaying payments. It is a very common form of short-term finance.

Common mistakes

✗ Confusing trade credit with other forms of finance like grants or asset sales.

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