Question

A coffee shop buys cups and mugs for resale from a supplier and is allowed 60 days in which to pay the invoice without penalty. This is an example of ____.

Answer 1

The coffee shop's 60-day payment agreement with the supplier is an example of trade credit, a common form of short-term business financing.

Step-by-step explanation:

The coffee shop's arrangement with its supplier, where it has 60 days to pay the invoice without penalty, is an example of trade credit. Trade credit is a common form of short-term financing, often used in business transactions between suppliers and retailers or other businesses. In this scenario, the coffee shop has the opportunity to sell the purchased cups and mugs for resale, potentially making a profit before the payment for goods is due to the supplier.