Answer (C) is correct . Trade credit is a spontaneous source of financing because it arises automatically as part of a purchase transaction. The terms of payment are set by the supplier, but trade credit usually requires payment within a short period of time. Trade credit is an important source of credit for all businesses but especially for buyers, such as small businesses, that might not have access to other credit markets. Like all forms of financing, trade credit is subject to the risk of buyer default.
Answer (A) is incorrect because Trade credit is an important source of financing for small firms.
Answer (B) is incorrect because Trade credit is ordinarily a short-term source of financing.
Answer (D) is incorrect because The cost of trade credit depends on the credit terms and the price paid. A seller with generous payment terms may charge a higher price for its merchandise.
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