When deciding whether or not to take a cash discount, the cost of borrowing from a bank or other source should be compared to the cost of trade credit to determine if the cash discount should be taken.

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This is true as it is important to determine if the cost of borrowing from a bank or other source is greater than the cost of forgoing the cash discount and taking the trade credit. Only then should a decision be made about whether or not to take the cash discount.

When Deciding Whether or Not to Take a Cash Discount