What term describes credit extended by one business to another to help finance distribution of producer's goods?

• A. Bank line
• B. Consumer loan
• C. Trade credit
• D. Installment credit

Answer: (C)

Trade credit is credit extended by one business to another to help finance the distribution of producer's goods. It typically lets the buyer receive goods now and pay later, under agreed terms such as net 30, which helps the distributor or retailer move products through the channel without tying up cash immediately. For the seller, it creates an accounts receivable; for the buyer, a current liability, and it’s usually short-term to keep the distribution flow smooth.

This differs from a bank line, which is a financing facility provided by a bank rather than a supplier tied to specific goods; a consumer loan, which goes to individuals for personal purchases; and installment credit, which is a loan repaid over time for consumer or personal items rather than inter-business distribution financing.