Podcast
Questions and Answers
Which payment method is most commonly used for high-value transactions?
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?
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?
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?
Which payment method allows a business to sell goods without upfront payment to the exporter?
What is a significant risk level associated with the consignment payment method?
What is a significant risk level associated with the consignment payment method?
What is typically required from a consumer when utilizing hire purchase as a payment method?
What is typically required from a consumer when utilizing hire purchase as a payment method?
What is the characteristic of trade discounts?
What is the characteristic of trade discounts?
Which payment method typically includes interest charges after a grace period?
Which payment method typically includes interest charges after a grace period?
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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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