A trade discount formula with example is a mathematical equation used to calculate the discounted price of goods or services, often used in business-to-business transactions. For instance, a retailer may purchase products from a wholesaler with a 20% trade discount, meaning they can purchase the goods for 80% of the listed price.
Trade discount formulas are essential for businesses to accurately determine the final cost of goods they purchase or sell, ensuring correct inventory valuation and financial reporting. Historically, trade discounts emerged in the early 19th century as a means for businesses to establish standardized pricing structures, facilitating more efficient and transparent transactions.