Duk Yu, a beverage company, buys its raw materials from Nessange, a fruits and vegetables exporting company, without making any payment at the time of purchase. Instead, Nessange allows Duk Yu to pay the total purchase amount within a period of six months. Which of the following short-term financing options is being used by Duk Yu in the given scenario?
A) Trade credit
B) Factoring
C) Short-term bank loans
D) Commercial paper

Question

Quizplus · Accepted Answer

Trade credit is a short-term financing option where a supplier allows a buyer to purchase goods or services on account, deferring payment to a later date. In this scenario, Duk Yu is using trade credit by purchasing raw materials from Nessange and paying for them within six months.

Duk Yu, a Beverage Company, Buys Its Raw Materials from Nessange