The trade credit will in supply chain transactions

Abstract

The trade credit is an important way of the enterprise’s short-term financing and used wildly. Because of the uncertain market demand, both the retailer and the supplier have the risk of losses. So, they must do the appropriate choose between trade on credit and trade on cash. In this paper, the trade credit will of both sides is studied from the angle of retailer’s own funds. The result explains the trade credit threshold in practice. The retailer with any own funds would like to choose trade credit, but the supplier only provides trade credit on certain condition. In the last, some management advices are given to the retailer and the supplier according the analysis, and numerical examples are given to make the theory analysis be visually.