Question

Difference between public deposit and trade credit with chart

Answer 1

Explanation:

TRADE CREDIT -

Trade credit is the credit extended by one trader to another for the purchase of goods and services It facilitates the purchase of supplies without immediate payment and is commonly used by business organisations as a source of short-term financing. Trade credit appears In the records of the buyer of goods as ‘sundry creditors’ or’ accounts payable’ It is granted prudently to those customers who have reasonable amount of financial standing and goodwill.

Trade credit is credit extended by one trader to another for purchase of goods and services.

PUBLIC DEPOSITS-

Public deposits refer to the unsecured deposits invited by companies from the public mainly to finance working capital needs. A company wishing to invite public deposits makes an advertisement in the newspapers.

Public deposits are deposits raised by firm directly from the public.

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Answer 2

A trade credit is a business-to-business agreement in which the  customer purchase goods  from the seller on account without paying cash upfront. Public deposits refer to the unsecured deposits invited by firmsfrom the public primarily to finance working capital needs.

Explanation:

• Trade credit is the credit for purchasing goods and services sold from one dealer to another. Trade credit allows products to be purchased without payment immediately. These loans appear as 'sundry investors' or 'accounts payable,' in the records of the buyer of goods. Trade credits are commonly used as a source of short-term funding for business organizations. Customers with fair financial stability and goodwill are given trade credit. The extended amount and loan duration rely on factors like the credibility of the buyer, the seller's financial position, transaction volume, past payment record and market competitiveness. Terms of trade credit can differ between industries and between individuals. A business can also give different credit terms to different customers.

Advantages:

1. Trade credit is a convenient and continuing source of funds.
2. Trade credit can be readily available in the event that the credit value of the customers is known to the seller.
3. Trade credits may promote the sales of an organization; in order to meet the anticipated rise in sales volume, an organization may use trade credit to finance the same.
4. It does not create any charge on the company's assets as when it provides funds.

Disadvantages

1. Availability of flexible and easy trade credit facilities may induce a firm to indulge in over-trading, which may add to the company's risk;
2. Limited amount of funds can be raised through trade credit;
3. Usually constitutes an costly source of money, as compared with many other sources of collected money.

• Deposits received directly from the public by organizations are called public deposits. Public deposit interest rates are generally higher than those available in bank deposits. Anyone wishing to deposit money into an organization may do so by completing a prescribed form. In return, the company issues a certificate for debt identification. The medium- to short-term financial needs of the company can be covered by public deposits. Both the depositors and the company profit from the deposit. Although the interest rate of the depositors is higher than that of the banks, the expense of the companies 'deposits are lower than that of bank borrowings. In general, businesses accept public deposits for up to 3 years. The Reserve Bank of India controls the acceptance of public deposits.

Advantages

• The deposit mechanism is simple and does not have stringent conditions typically set out in the loans.
• Public deposit rates are typically lower than the cost of borrowings from banks and financial institutions.
• Public deposits normally do not place any charge on the company's assets. The assets may be used as a collateral for the acquisition of credit from other sources
• The company's power is not weakened as depositors do not have voting rights.

Disadvantages

1. The collection of public deposit can be difficult for new businesses, especially where the deposit needed is high.
2. It is an unreliable  financial source, and when a company needs money the public can not respond.

To know more

What are the types of business finance?​ - Brainly.in

https://brainly.in/question/11135549