Question

Jennifer runs a ski store in banff, alberta. she buys all her skis for the season in the fall but doesn't receive any money until she sells the skis, which is usually a few months later. the suppliers of the skis will extend the time she needs to pay for the skis to 90 days. what is the term to describe what her suppliers are offering jennifer?

a. extended credit
b. trade credit
c. supplier credit
d. line of credit

Answer 1

In Jennifer's situation, where suppliers allow her a 90-day payment period for her ski inventory, the correct term is 'trade credit'. This type of credit is essential for managing cash flow and working capital, particularly for retailers who buy goods before making sales.

Step-by-step explanation:

Jennifer, who runs a ski store in Banff, Alberta, faces a typical situation in business where she must purchase inventory in advance of sales. The scenario described, where her suppliers allow her 90 days to pay for the skis, is commonly known as trade credit. This practice is especially helpful for businesses that have a gap between acquiring their goods and selling them, alleviating cash flow pressures.

Trade credit is indeed the correct term for the scenario described: the suppliers extend the time Jennifer has to pay for the inventory, giving her the ability to sell the skis before needing to settle the invoice. This arrangement is crucial in helping manage the store's working capital and is an important aspect of supplier-customer relationships in various industries.