Asked by
Oscar Martinez-Trujillo
on Nov 07, 2024
Verified
Which of the following statements is false regarding trade credit?
A) Trade credit is created when a firm uses cash to make purchases from another firm.
B) Trade credit is not usually an interest-bearing asset for the firm granting the credit.
C) Trade credit possesses a degree of default risk.
D) Collection of trade receivables can be sped up by offering discounts.
E) Trade credit is an important source of external financing for Canada firms.
Interest-bearing Asset
A type of investment that earns interest over time, such as savings accounts, certificates of deposit, and bonds.
Default Risk
The risk that a borrower will not make the required payments on a debt.
Trade Credit
An arrangement where a buyer can purchase goods on account without paying cash upfront, with payment to the seller due at a later date.
- Learn about the essence of trade credit, its value, and the specifics of credit agreement terms.
Verified Answer
JP
Learning Objectives
- Learn about the essence of trade credit, its value, and the specifics of credit agreement terms.