FIN 200

Week 7

Checkpoint

Trade credit is the most popular form of short term financing, figures show that over 40 percent of businesses use this form.

Trade is also known as accounts payable. This form of short term financing happens when manufacturers or suppliers provide goods or services upfront to companies with the expectation of getting payment within 30 to 60 days from time of delivery. Usually suppliers may offer discounts if the receiving company makes payment within a specified period of time.

This kind of short term financing would be chosen by businesses for many reasons such as the company may not readily have the cash on hand to purchase inventory.

Bank Credit is another form of short term financing. This type of financing usually comes in the form of loans...