10) Briefly explain any two merits and two limitations of trade credit as a source of finance.

    advantages:-  1. It is easy and automatic source of short-term finance.4
 2. It reduces the capital requirement.

3. It helps the business focus on core activity                                                                             4. It does not require any negotiation or formal agreement.

disadvantages :-

i. Trade credit is available only to those companies that have a good track record of repayment in the past.
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ii. For a new business, it is very difficult to finance working capital through trade credit.

iii. It is very expensive if payment is not made on the due date.