Based on the data collected from the Taiwan Economics Journal database, in manufacturing industries group, the average ratio of accounts receivable to sales revenue is about 42% while accounts payable to cost of goods sold is about 41%. In the nonmanufacturing
industries group, the ratio of accounts receivable to sales revenue is about 29% while accounts payable to cost of goods sold is about 26%. It is obvious that themanufacturing industrieswill use more trade credit than non-manufacturing industries because the non-manufacturing industries include more retail and service firms,which are likely to usemore cash transaction instead of credit transaction. Therefore, the supply and demand of trade credit on non-manufacturing industries are less important than manufacturing industries, leading to the following hypothesis: