What does trade payable refer to?

• A. Money owed by customers for services received
• B. Money owed by the enterprise to suppliers for raw materials
• C. Money received from selling goods and services
• D. Money that needs to be paid for issuing shares

Answer: (B)

Trade payable refers specifically to the amount of money that an enterprise owes to its suppliers for goods and services purchased on credit, typically raw materials or inventory necessary for its operations. This financial obligation reflects the company's short-term liabilities and indicates the credit terms extended by suppliers. By having trade payables, a business can effectively manage cash flow, allowing it to allocate resources for other operational needs while maintaining inventory levels.

Understanding trade payables is essential for effective financial management, as it impacts a company's liquidity and cash flow planning. Managing payables efficiently helps an enterprise ensure it can meet its financial obligations while optimizing operational efficiency.