Question

Trade credit is more economical than bank loan as it is available with no interest.

• A. True
• B. False

Answer 1

The correct option is A True

• Trade credit refers to an arrangement where a manufacturer is granted credit from the supplier of raw materials, inputs etc.
  
• The supplier allow their client to pay their outstanding balance, within credit time limit. Generally, time limit varies from 3 to 6 months.
  
• It is more economical than bank loan because of its availability i.e., it is readily available without any special effort from a manufacturer or trader and also it is flexible in nature as there are no strict rules and regulation involved in it.
  
• Major disadvantage of trade credit is sometimes the supplier may increase of goods supplied if he sells goods on credit.