MANAGEMENT OF CREDITORS

Managing creditors is a key part of working capital management. Trade credit is the simplest and most important source of short-term finance for most companies. The objective of creditor management is to ascertain the optimum level of trade credit to accept from suppliers. It should be used wisely since trade credit that is received influences the trade credit given.

REQUIRED

In view of the extract above:

4.1 Provide THREE (3) reasons for using trade credit.

4.2 Explain the competing objectives associated with trade credit.

4.3 Suggest strategies for the effective management of creditors.