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Chapter 26, Problem 6P
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To determine: The effective annual cost of trade credit.

Introduction:

Trade credit is an offering given by the suppliers to the firm. When supplier agrees to deliver the products and gives a specified time period for the payment, he will tend to give some sort of percentage as a credit discount to the firm, if the payment is made within the specific period.

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Debits and credits explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=n-lCd3TZA8M;License: Standard Youtube License