In contrast to common literature that suggests that trade credit is an extremely expensive source of financing with … annual interest rates exceeding 40 percent, this paper argues that the average interest rate of trade credit does not exceed … credit constitutes a substantial part of the optimal financing mix also of large, liquid, and capital market listed firms …

We explore how trade credit complements cash holdings in product market competition. First, similar to cash to cash … flow sensitivity (Almeida, Campello, and Weisbach 2004), we report that trade credit is sensitive to internal cash flows … show that both trade credit and cash holdings are strategically valuable in product market competition and their valuations …