Terms Of The Sale

As we described previously, the terms of a sale are made up of three distinct elements:

1. The period for which credit is granted (the credit period)

2. The cash discount and the discount period

3. The type of credit instrument

Within a given industry, the terms of sale are usually fairly standard, but these terms vary quite a bit across industries. In many cases, the terms of sale are remarkably archaic and literally date to previous centuries. Organized systems of trade credit that resemble current practice can be easily traced to the great fairs of medieval Europe, and they almost surely existed long before then.

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