What financial benefit does a cash discount provide to retailers?

A cash discount offers a significant financial benefit to retailers by reducing overall expenses when payments are made early. By taking advantage of the cash discount, retailers can lower their costs associated with purchasing goods. This can lead to improved cash flow management, as paying earlier can also prevent additional costs associated with financing or late payments.

When retailers pay invoices earlier to benefit from cash discounts, they effectively decrease the total amount spent on inventory, which can enhance profitability. This practice encourages a healthier financial position and can allow retailers to allocate resources to other areas of the business, such as marketing or additional stock.

The other options, while potentially beneficial in different contexts, do not relate directly to the impact of cash discounts on overall expenses. Encouraging bulk purchases and providing a rebate do not specifically address the immediate financial benefit derived from timely payments, and increasing credit limits applies to credit management rather than the advantages of cash discounts.