Terry
0450-19-O-N-12-3e
Chan
TOPIC QUESTION - PAPER 1
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Chan
May 17, 2026 at 7:36:21 AM
May/June 2022
Version 3
5.0 Financial Information and Decisions
5.1 Business Finance: Needs and Sources
YOUR ANSWER
LBM could use trade credit from suppliers as a source of finance. As LBM will order more inventory to be able to add 3500 new styles each week, LBM could pay suppliers later while it increases its revenue from the increase in output. LBM could also use overdraft, as it can be approved quickly to pay suppliers should revenue be low. However, LBM would have to pay a high interest with an overdraft facility. As such, LBM should best use trade credit as a source of finance to purchase additional inventory.
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