7/21/2019 Trade Credit

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Presented by; Muhamm

B

 TRADE CREDIT

7/21/2019 Trade Credit

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• Trade Credit– Advantaes ! Disadvantaes "# Trade Credit

–  Ty$es "# trade %redit

•  Trade Credit Terms

&  Ty$es "# trade %redit terms

& 'a%t"rs that inuen%e trade %redit terms

 TABE *' C*+TE+TS

7/21/2019 Trade Credit

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• An areement thr"uh $ur%hase "# ""ds (invent"a,%-

• Payin "n a .ater date-

• /iven #"r a s$e%i0% time $eri"d-

• It is iven s"metimes t" en%"urae sa.es-• Essentia. t"". #"r 0nan%ia. r"1th-

• Buy n"1 and $ay .ater-

• Easiest and m"st im$"rtant s"ur%e "# sh"rt term 0n

 TRADE CREDIT

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• Advantaes

• An areement easy t" "rani3e-

• An areement easy t" maintain4 as ."n as the

%"nditi"ns are met-

• Can be used by m"st business4 #"r su$$.ies "# servi%es-

• A $"tentia..y ."15%"st #"rm "# 1"r6in %a$ita. 0

AD7A+TA/E A+D DISAD7A+TA/ES TRADE CREDIT

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• Disadvantaes

• P"ssib.e ."ss "# ear.y $ayment dis%"unt-

• I# %"nditi"ns are n"t met4 resu.ts in ."ss "# a su$

• Cann"t be used by a.. businesses4 su%h as "n.inretai.ers-

•  There are n" uarantees4 as %ust"mers may $a

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• Main.y three ty$es "# trade %redit

i- *$en A%%"unt

ii- Pr"miss"ry +"te

iii-  Trade A%%e$tan%e

 T8PES *' TRADE CREDIT

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i- *$en A%%"unt9:nder this arranement4 the buyer reues

"# %redit #r"m the se..er-<

. ine "# %redit

9Riht iven t" the Buyer #"r the $ur%hase "n %red%ertain am"unt #r"m the se..er based "n his re$utati"

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2- Pr"miss"ry +"te•. :nder this arranement4 the buyer sins a n"te

the se..er #"r $ur%hasin ""ds "n %redit-

•. The buyer $r"mises t" ma6e $ayment "n s"me

date-•. The $ayment is made by the Buyer himse.#-

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=- Trade A%%e$tan%e•. It is same as Pr"miss"ry n"te-

•. But in this4 the $ayment is made by the ban6-

•. Time #a%t"r is inv".ved in it i-e- made $ayment

s$e%i0ed time-•. And made this $ayment "n.y t" the h".der "# th

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•  The terms and %"nditi"ns under 1hi%h the ""ds are s"%redit #r"m the se..er t" buyer-

  OR

• >hen a business enters int" a trade %redit arranementsu$$.iers4 a .imit is usua..y set4 %"mm"n.y %a..ed %redit t

• Credit terms 1i.. di?er #r"m business t" business and indindustry-

• Businesses that re%eive $ayments "n de.ivery4 #"r e@am"n.ine sh"$$in sites4 may have a sh"rter %redit term thindustria. manu#a%turer-

 TRADE CREDIT TERMS

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• Main.y Si@ ty$es "# Credit termi- Credit $eri"d "n.y

ii- End "# m"nth (E*M)

iii- Cash dis%"unt and End "# m"nth

iv- Re%ei$t "# /""ds (R*/)

v- Datin

vi- Cash "n De.ivery and Cash be#"re De.ivery

 T8PES *' CREDIT TERM

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- Credit $eri"d "n.y.  Ta6e 9+et4=< as %redit $eri"d "n.y-

9>hi%h means that $ayment "# ""ds traded%redit must be d"ne 1ithin the 9=< days #r"m t

Se..in Date-<

.  Ta6e 92,4+et =<

9>hen 1e "?er dis%"unt-<

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2- End "# m"nth. C"nsider 9+et 24 E*M< as End "# M"nth term

9>hi%h means that the $ayment must be mthe 92th 9 date "# the ne@t m"nth-<

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=- Cash dis%"unt and End "# m"nth. I# the %redit term is 92,4 +et 24 E*M<-

9It means that the $ayment "# the ""ds md"ne "n the 92th 9 date "# ne@t m"nth but i# t

$ayment is made 9*n< "r 9Be#"re< the 9th < the ne@t m"nth4 then 92< dis%"unt 1i.. be ivthe $ayment-<

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- Re%ei$t "# /""d (R*/). :nder the re%ei$t "# ""ds %"nditi"n4 the %redit term

#r"m the date u$"n 1hi%h the de.ivery "# the ""dsre%eived-

. The re%ei$t "# ""ds %"nditi"n %an a.s" be 92,4 +

R*/<-

9>hi%h means that $ayment must be made in 92<#r"m the date "# de.ivery- 92< Dis%"unt sh"u.d be iven4 i# $ayment is made in 9< days #r"m de.iver

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- Datin. Su%h ty$e "# %redit term arises4 1hen 9"? seas

""ds are traded-

9>hi%h means that4 ""ds are b"uht by the

in the 9"? seas"n< and the 9$ayment< is d"ne the seas"n 9arises< and the ""ds are 9s".d<-<

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F- Cash "n De.ivery and Cash be#"re De.. :nder the %ash "n de.ivery areement4 the $a

is made 1hen the 9de.ivery< "# ""ds is re%eiv

. :nder the %ash be#"re de.ivery areement4 the$ayment is made "n the 9s$"t< be#"re re%eivi""ds-

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• Gere are s"me "# the #a%t"rs that inuethe %redit terms

i- Mer%handise %hara%teristi%s

ii- Status "# buyer

iii- Status "# se..er

iv- Industry $ra%ti%e

'ACT*RS TGAT I+':E+CE CREDIT TE

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- Mer%handise %hara%teristi%s

9The %redit terms are inuen%ed by the9seas"na.ity4 $erishab.es4 "bs".es%en%e4 %"st demand $atterns< "# the mer%handise s".d-<

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2- Status "# buyer

9I# a buyer has an estab.ished setu$ and he0nan%ia..y str"n then in su%h a %ase4 the buyne"tiate %redit terms in his #av"r and the se.

#"r%ed t" aree "n the terms "# the buyer-<

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=- Status "# se..er

9I# the se..er is in the $"siti"n "# m"n"$".y t%an de%ide the %redit term in his #av"r but i# h0nan%ia..y 1ea6 then he 1"u.d $re#er t" ma6e

#"r %ash "r 1"u.d .i6e t" re%eive $ayment as as $"ssib.e-<

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- Industry $ra%ti%e

9The %redit terms are a.s" inuen%ed u$"n tenera. %"nditi"n "# the %redit terms 1hi%h are$revai.in in the industry4 are a%%e$ted by a..

0rms "# the same industry-<

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 Than6sH-

Presented t" Madam Maria

 TGATS A '*R *:RPRESE+TATI*+