please explain trade deposit with merit and demerit
Dear student,
Trade Credit is an important source of finance for business. When a supplier made sale of goods or services to purchaser without immediate receipt of payment but with an agreement to make payment at future date, then it is referred as trade credit. It is short term credit extended by supplier in normal course of business.
The merits of Trade credit are:
1. It is an easy source of finance, as it does not involve any legal documentation.
2. It reduces capital requirement.
3. It helps in promoting sales.
The demerits of Trade credit are:
1. Easy availability of trade credit can lead to over trading.
2. It is an expensive source if payment is not made on due date.
3. This source is available to those companies only which have good track record in payment of dues.
Regards
Trade Credit is an important source of finance for business. When a supplier made sale of goods or services to purchaser without immediate receipt of payment but with an agreement to make payment at future date, then it is referred as trade credit. It is short term credit extended by supplier in normal course of business.
The merits of Trade credit are:
1. It is an easy source of finance, as it does not involve any legal documentation.
2. It reduces capital requirement.
3. It helps in promoting sales.
The demerits of Trade credit are:
1. Easy availability of trade credit can lead to over trading.
2. It is an expensive source if payment is not made on due date.
3. This source is available to those companies only which have good track record in payment of dues.
Regards