Payment Methods and Terms of Sale
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Questions and Answers

Which payment method is most commonly used for high-value transactions?

  • Cheque (correct)
  • Hire Purchase
  • Cash
  • Trade Credit
  • What is the primary benefit of offering a cash discount to customers?

  • To eliminate interest charges
  • To improve the seller's cash flow (correct)
  • To reduce prices for all customers
  • To encourage larger orders
  • For which situation is a layaway payment method most suitable?

  • High-risk transactions
  • Immediate delivery of goods
  • Purchases planned over time (correct)
  • Large impulsive purchases
  • Which payment method allows a business to sell goods without upfront payment to the exporter?

    <p>Consignment</p> Signup and view all the answers

    What is a significant risk level associated with the consignment payment method?

    <p>High risk for the distributor in new markets</p> Signup and view all the answers

    What is typically required from a consumer when utilizing hire purchase as a payment method?

    <p>Fixed monthly payments and an initial deposit</p> Signup and view all the answers

    What is the characteristic of trade discounts?

    <p>Applied to a product's cost when selling to a reseller</p> Signup and view all the answers

    Which payment method typically includes interest charges after a grace period?

    <p>Credit Cards</p> Signup and view all the answers

    Study Notes

    Terms of Sale: Payment Methods

    • Terms of Sale refer to the payment methods used for purchases.

    Cash and Cheque Payments

    • Cash is commonly used for small purchases, is universally accepted, and offers convenience for travelers.
    • Cheque is more common for high-value transactions than cash but less frequently used overall.

    Credit: Delayed Payment Options

    • Trade Credit: Businesses allow their customers to pay within a timeframe, typically one to two months.
    • Credit Cards: Consumers have 28 days to pay their balances, with interest charges applied after the period expires.
    • Hire Purchase (Installment Credit): Allows purchases over time, requiring an initial deposit and fixed monthly payments with interest.
    • Layaway: The seller reserves an item for the consumer during the payment period. The buyer takes ownership only after completing all payments.

    Discounts: Incentives for Buyers

    • Cash Discount: A reduction in the total amount owed by a customer for prompt payment. Used to encourage quick payments and improve cash flow for the seller.
    • Trade Discount: A reduction in the product's price applied by the supplier when selling to resellers for profit on reselling.
    • Quantity Discount: A reduction for bulk purchases, encouraging larger orders.

    Consignment: Sell on Behalf

    • Placement: Goods are entrusted to another party for sale.
    • Sale: The consignee sells goods on behalf of the owner. The consignee receives a percentage of sales revenue.

    International Trade Consignment

    • Goods are sent to an international distributor for sale.
    • The exporter receives payment only after goods are sold to the end customer.
    • This method mitigates risk for distributors in new markets.

    Choosing the Right Payment Method

    • Cash: Best for small purchases with low risk.
    • Credit: Suitable for larger purchases with a medium risk.
    • Layaway: Ideal for planned purchases with low risk.
    • Consignment: Best for specialized goods with high risk.

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    Description

    Explore the various payment methods and terms of sale used in transactions. This quiz covers cash, cheque, credit options, and discount incentives. Test your knowledge on how these methods work and their implications for buyers and sellers.

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