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Chapter 9

Accounts payable

2.1 Objectives

Trade credit is the simplest and most important source of short-term finance for many
entities. Again it is a balancing act between profitability and liquidity.

Liquidity – Delaying
payments to
suppliers to obtain a
'free' source of
finance.

Profitability –
Delaying too long
may cause difficulties
for the company in
the long term.

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