New study reveals how trade credit impacts corporate inventories and finances.
Trade credit is a common way for companies to finance their operations. This study looks at how trade credit is related to inventories. The researchers created a model to show how companies decide to offer or receive trade credit based on factors like inventory costs, profitability, risk, and liquidity. They found that changes in these factors affect how much trade credit companies use. This shows that trade credit is not just about money, but also about how companies manage their production processes.