Question

Describe trade credit as a form of short term financing In regards to Commercial Paper: Briefly...

  1. Describe trade credit as a form of short term financing
  2. In regards to Commercial Paper:
    1. Briefly describe what it is.
    2. Identify the 3 forms of commercial paper
    3. List the advantages of issuing commercial paper
    4. List the limitations on issuing commercial paper.
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Answer #1

Meaning of Credit

  Credit means something in which the borrower has the option to pay on a future for the benefits that are received now

Trade Credit

Trade Credit is a form of short term financing.Trade credit is the credit facility which is given by one trader to another trader at the time of purchase of goods.

It helps to purchase the goods without immediate payment and serves as a short term financing need.

It also helps the person taking credit which is the buyer to improve his cash flow and will not incur any out of pocket costs like interest etc.

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