When a supplier agrees to receive payment at a later date for goods and services sold to a firm, trade credit has been extended by the supplier.

Question

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Trade credit is the extension of credit by suppliers to customers who purchase goods or services on credit and agree to pay for them at a later date. This allows businesses to maintain cash flow while still obtaining the necessary goods and services for their operations. Therefore, when a supplier agrees to receive payment at a later date, they have extended trade credit to the customer.

When a Supplier Agrees to Receive Payment at a Later