Trade discount is a form of customer-specific pricing whereby a seller offers a discount from the list price of a product or service. This discount is typically offered to businesses that purchase large quantities of goods or services and is calculated as a percentage of the list price.
It is an essential tool for businesses because it allows them to obtain goods and services at a lower cost, which can lead to increased profits. Additionally, trade discounts can help businesses build relationships with suppliers and improve their cash flow.