Question

Credit extended by one trader to another for the purchase of goods and services is called as .
(Choose the correct option to fill up the blank)

• A. Bank Overdraft
• B. Trade Credit
• C. Term Loan
• D. Lease Financing

Hint:

Ask who is giving the credit: a trader, a bank, or an asset owner.

Answer 1

The Correct Option is B

Step 1: Understand the question:
The question describes credit given by one trader to another. The words to notice are 'one trader' and 'goods and services'.

Step 2: Recall the term:
When a supplier sells goods and allows the buyer to pay after some days, such as 30 or 60 days, it is called trade credit.
The buyer gets goods now and pays later. It is a short-term source of finance.

Step 3: Check option (A) Bank Overdraft:
In an overdraft, a bank allows a current account holder to draw more than the balance. The lender is a bank, not a trader. So (A) is wrong.

Step 4: Check option (B) Trade Credit:
This is the credit given by a trader to another for goods and services. So (B) is correct.

Step 5: Check option (C) Term Loan:
A term loan is a loan of a fixed amount from a bank or institution, repaid over a fixed period. So (C) is wrong.

Step 6: Check option (D) Lease Financing:
In lease financing, an owner allows another person to use an asset for rent. No goods are bought on credit. So (D) is wrong.

Final Answer:
The credit given by one trader to another is trade credit. This is option (B). \[ \boxed{\text{Option (B): Trade Credit}} \]