There Is a Saying in Banking That When a Business

question 224

Multiple Choice

There is a saying in banking that when a business is experiencing financial problems, trade creditors are the first to know. Why would this be true?

• A) Trade creditors perform credit checks less often than do banks.
• B) Trade creditors get all of their information about credit risks from banks.
• C) Trade creditors can easily repossess the merchandise sold if the borrower refuses to pay.
• D) Trade credit is usually extended only to the most creditworthy of businesses, while banks will make short-term loans to almost any business.
• E) Trade credit is typically of shorter maturity, and offered more frequently, than other types of credit such as bank loans.

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Definitions:

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