Future Business Leaders of America (FBLA) Business Calculations Practice Test

A trade discount is:

1. A. a reduction from the seller's list price given to businesses "in the trade"

2. B. a discount for barter or trade transactions

3. C. a reduction from the manufacturer's list price given to businesses "in the trade"

4. D. a discount for a cash payment versus a credit card payment

The correct answer is: C. a reduction from the manufacturer's list price given to businesses "in the trade"

A trade discount refers specifically to a reduction from the manufacturer's list price that is provided to businesses that are recognized as operating "in the trade." This type of discount is typically offered to wholesalers or retailers who purchase products directly from the manufacturer. The purpose of a trade discount is to encourage bulk purchasing and to make it more attractive for businesses to buy directly rather than through intermediary channels. By offering this discount, manufacturers can foster stronger relationships with their distributors and ensure that their products reach a wider audience. Furthermore, trade discounts can help businesses maintain competitive pricing, as they often pass these savings on to their customers. The other options describe different forms of discounts but do not accurately capture the essence of a trade discount. A discount for barter transactions or for cash payments pertains to different kinds of financial arrangements, while a discount for businesses "in the trade" specifically relates to reductions from the list price offered by manufacturers to certain classes of business buyers.