Wholesalers assume the credit risk for producers by extending retailers credit, collecting payment from retailers, and assuming the risk of nonpayment.

Question

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Wholesalers often provide credit to retailers and are responsible for collecting payments from retailers. Therefore, they assume the credit risk for the producers by guaranteeing the payment from the retailers and assuming the risk of nonpayment.

Wholesalers Assume the Credit Risk for Producers by Extending Retailers