Offering trade credit discounts is costly to a firm and as a result, firms that offer trade discounts are usually those that are performing poorly and need cash quickly.

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Offering trade credit discounts can actually be beneficial to a firm as it can encourage customers to make purchases and improve cash flow. Firms that offer trade discounts may not necessarily be performing poorly, but rather are using this strategy as a marketing tool.

Offering Trade Credit Discounts Is Costly to a Firm and as a Result