When deciding whether or not to take a trade discount, the cost of borrowing funds should be compared to the cost of trade credit to determine if the cash discount should be taken.

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When deciding whether or not to take a trade discount, it is important to compare the cost of borrowing funds (such as taking out a loan) to the cost of trade credit (which is essentially a short-term loan from the supplier). If the cost of borrowing funds is higher than the cost of trade credit, it may be more beneficial to take the cash discount offered for early payment.

When Deciding Whether or Not to Take a Trade Discount