Western Governors University (WGU) BUS5000 C201 Business Acumen Practice Exam

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What is trade credit often referred to as?

A loan with interest

A free loan

Trade credit is often referred to as a "free loan" because it allows businesses to purchase goods or services from suppliers with the agreement to pay at a later date, typically without immediate cash outlay. This form of credit is a common practice in business transactions, particularly among wholesalers and retailers, as it helps manage cash flow. When a business utilizes trade credit, it can maintain inventory and operations without immediate financial pressure, effectively using the supplier's resources temporarily without incurring interest charges, as long as the payment terms are adhered to. This characteristic of being able to purchase and delay payment without cost aligns with the notion of a "free loan."

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Short-term investment

An equity offering

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