Extending Trade Credit Policy And Financing Receivables Journal Of Applied Corporate Finance Pdf

extending trade credit policy and financing receivables journal of applied corporate finance pdf

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Published: 09.05.2021

Appuhami, B.

Journal of Insurance and Financial Management

Economic literature reveals a lack of a general theory on trade credit. This paper reviews the main theoretical and empirical contributions providing a simple but complete guide to researchers. Likewise, future research is encouraged by showing the puzzled and less explored features of trade credit. Moreover, this study is novel in reviewing the linking between trade credit and monetary restrictions, providing some light to the emerging literature on the role of trade credit in the transmission of monetary policy.. ISSN: Descargar PDF.

The multivariate relationship model proposed here is grounded in trade credit, agency and transaction costs theories. This study is based on a technique known as path analysis that uses a system of simple regressions estimated by simultaneous equations. The main results show the following: i trade credit and short-term bank loans are supplementary and not substitute sources of funds for MSMEs, which demonstrates that trade credit can be used by financial institutions as an indicator of the creditworthiness of the company; ii the proportion of credit sales, the days sales outstanding measure and sales growth are positively related to the amount of trade credit demanded, which suggests that trade credit is transferred along the supply chain; and iii the supply of trade credit is positively related to the importance that management ascribes to both internal capital and bank credit, which illustrates the strategic use of the supply of trade credit to increase sales. These results have important implications for companies' managers, financial institutions and the government agencies responsible for formulating policies that support and promote the development of small and medium-sized enterprises. Trade credit TC is an important financing and investment channel that companies commonly demand and supply to one another.

The Role of Trade Credit and the Cost of Capital

An economic downturn can occurred through unexpected events in various fields, such as the subprime mortgage crisis and the outbreak of Coronavirus Disease COVID Trade credit is important for small- and medium-sized enterprises SMEs , especially during a monetary contraction, as it is the last option for firms that lack bank credit. This study aims to determine whether trade credit is profitable for the buyer and supplier firms during and after a financial crisis. We use panel data consisting of all trade credit transactions and financial statements of 5, Korean firms during the period It shows that trade credit is more profitable for both buyers and suppliers in the post-crisis period than during the crisis. Moreover, trade payable is more effective for unconstrained buyers than for constrained buyers.


Trade credit and other types of working capital, like inventory, may constitute in the firm's credit policy: an evaluation', Journal of Financial and Strategic Decisions, 11(2), 41–9. Mian, S.L. and C.W. Smith () 'Extending trade credit and financing receivables', Journal of Applied Corporate Finance, 7(1), 75–​


The Role of Trade Credit and the Cost of Capital

Trade credit and other types of working capital, like inventory, may constitute significant components of a long-term investment in capacity expansion, particularly within businesses dependent on working capital, like wholesaling and retailing. Still the treatment of cash committed to these types of working capital is often lacking in consistency; the focus tends to be on net cash flow effects see for example Allen, ; Kroll, ; Kaplan and Ruback, ; Mills, The standard approach is to regard the net of the initial working capital cash flow of a project as an investment that will be recovered at the termination of the project. Cash committed to inventory or trade credit in the form of receivables or payables, is thus implicitly assumed to be equally sensitive to changes in the economic environment.

Journal of Insurance and Financial Management

The purpose of this paper is to verify whether the benefits gained by granting extended payment terms can lead to higher profitability for Italian companies. Moreover, the analysis aims to investigate whether trade credit offered at a higher level than the sector average can contribute to the profitability of companies.

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