Which scenario exemplifies the use of trade credit?

The scenario that best exemplifies the use of trade credit is when a business acquires goods and pays later. Trade credit is a type of short-term financing where a buyer receives goods or services from a supplier with an agreement to pay for them at a later date. This practice allows businesses to manage their cash flow more effectively, enabling them to obtain necessary inventory without immediate out-of-pocket expenses.

In this case, the business can use the acquired goods to generate revenue before settling its obligations with the supplier. Trade credit is a common practice in business-to-business transactions and facilitates smoother operations, especially for companies that may not have immediate liquidity but still need to maintain inventory levels to meet customer demand. It enhances operational flexibility and can help businesses avoid cash shortages while they increase their sales.

The other choices do not capture the essence of trade credit; instead, they represent either immediate cash transactions, borrowing from financial institutions, or investing in financial securities, none of which involve the delayed payment characteristic of trade credit.