Which term refers to the practice of buying goods now and paying for them later?

• A. Bank Overdraft
• B. Relative Change
• C. Ascend
• D. Trade Credit

Answer: (D)

Trade credit is a financing arrangement in which a supplier lets you receive goods or services now and pay for them later. This lets a business use the items immediately while delaying payment, typically within a set credit period such as 30, 60, or 90 days. It’s a convenient way to manage cash flow because you can align the payment with when you expect to receive revenue, rather than tying up cash upfront.

If you pay within the agreed terms, there’s usually no interest charged, and some agreements offer a discount for early payment. This makes trade credit a flexible, low-cost option for short-term financing, especially for businesses that need to stretch cash flow between purchasing and selling.

The other options don’t describe this concept. A bank overdraft involves borrowing from a bank to cover shortfalls in your account, which is not specifically about delaying payment to a supplier. Relative change is a math idea about how much something changes relative to its original value, not a purchasing arrangement. Ascend is simply a verb meaning to rise.

So the term that best matches buying goods now and paying for them later is trade credit.