Question

Marcus’s store requires a lot of different types of inventory. He wants to carry a wide variety of surf and skateboards as well as clothing and accessories. Julian suggests that Marcus ask if some of the wholesalers that he orders from would be willing to delay payment for inventory ordered. Julian is talking about _____.

Answer 1

Julian is recommending trade credit as a way for Marcus to manage inventory without immediate cash payment, aiding in cash flow management.

Step-by-step explanation:

Julian is suggesting that Marcus engage in a practice known as trade credit. Trade credit is an agreement where a buyer is allowed to purchase goods and pay the supplier at a later scheduled date. This method is often used to manage cash flow and maintain adequate levels of inventory without immediate cash outlay. If wholesalers agree to delay payment, it can help a business like Marcus's store to keep a wide variety of products in stock, such as surf and skateboards, clothing, and accessories, even when immediate funds are limited. It also reflects how the business's inventory levels can fluctuate based on consumer demand and sales performance.

Answer 2

Julian is suggesting that Marcus take advantage of trade credit, which is a delayed payment arrangement with suppliers that can help manage inventory levels and cash flow.

Step-by-step explanation:

Julian suggests that Marcus ask his wholesalers if they would be willing to delay payment for inventory ordered. Julian is referring to a business practice known as trade credit. Trade credit is an arrangement where a supplier allows a business to purchase goods and pay for them at a later date, typically within 30, 60, or 90 days. This enables a business to stock a wide range of products, such as surf and skateboards, clothing, and accessories, without immediate cash outlay, alleviating cash flow pressure.

Retailers like Marcus who carry a variety of inventories including durable goods and nondurable goods might benefit from such arrangements, especially if sales fluctuate. The flexibility provided by trade credit can help maintain stock levels, even if a business experiences unexpected changes in sales velocity, which can either cause inventories to decline if business is better than expected or to rise if it's worse.