Question

Joe needs display racks and cabinets to open his clothing store, but he doesn't have the money to pay for them right away. A supplier agrees to sell Joe the necessary equipment, lets him have them immediately, and allows Joe to pay for the goods over a six-month period. This is an example of_______________.

a. equity financing.
b. an initial public offering.
c. a mortgage.
d. venture capital.
e. a trade credit.

Answer 1

Answer:

The correct answer is letter "E": a trade credit.

Explanation:

Trade credit implies a customer buying products from a seller that helps the purchaser to later pay for the goods. Essentially, the seller provides the buyer with a short-term loan. Typical terms of trade credit must be charged for 30 days, but may also be 45, 60, 90, or 180 days in some situations.