The cost of trade credit varies with the
A) size of the cash discount.
B) length of time between the end of the discount period and the final due date.
C) length of time between the end of the discount period and when the firm purchased from the supplier.
D) both A and C.

Question

Quizplus · Accepted Answer

The cost of trade credit is based on the length of time between the end of the discount period and the final due date. This is because the longer a company takes to pay its suppliers, the longer it ties up its own cash and the more interest it could potentially have to pay on any loans it takes out to fund its operations. The size of the cash discount offered by the supplier may also affect the cost of trade credit, but it is not the primary factor. The length of time between the end of the discount period and when the firm purchased from the supplier is not a relevant factor.

The Cost of Trade Credit Varies with the