The impact of trade credit on optimal quantity

Abstract

In this research, we consider the consequence of trade credit on optimal quantity. The annualized cost which is the uniform net present value over infinite time is derived and the optimal quantity and optimal time are obtained. This work is a modification of the model formulated by Chand and Ward (1987). The computation and graphical illustration based on the data collected from Lift Above Poverty Organisation (LAPO) show that the optimal quantity is time varying with a linear trend. This means that as the delay time increases the optimal quantity increases. It also implies that the optimal quantity is an increasing function of delay time.