Under the terms of trade found in most industries, the costly component of trade credit
A)is relatively cheap, thus financially strong firms forego the cash discount.
B)is relatively expensive, thus financially strong firms will take the cash discount.
C)is relatively expensive, thus financially strong firms forego the cash discount.
D)is relatively cheap, thus financially strong firms will take the cash discount.
E)is relatively cheap, thus most financially strong firms don't consider the terms of trade.

Question

Quizplus · Accepted Answer

Financially strong firms often take the cash discount because the cost of not taking it (i.e., the implicit interest rate on the trade credit) is relatively high.

Under the Terms of Trade Found in Most Industries, the Costly