First of all, let us understand how to utilize credit effectively
Say you purchase an item at the rate of 10 rupees and sell it at 15 rupees
Purchase - 10
Selling - 15
Therefore profit - 15 - 10 = 5 rupees
Purchase - Sell - take your profit - Purchase again. This is basically a cycle.
If I run one cycle - 5 rupees profit
10 cycles - 50 rupees profit
MORE THE CYCLE MORE THE PROFIT
This is called TURNOVER
Let us factor in credit here
Each time when you buy, you pay after 60 days
Say you finish the cycle (whatever you bought you sold) on the 10th day itself.
You get 15 rupees without paying any purchase cost
Then you buy for the next cycle for the same credit period of 60 days and you finish the cycle after 10 days of purchase
Likewise, when you do the first payment, you completed 5 cycles but paid only for the first cycle
Revenue for one cycle - 15 rupees
Revenue for 5 cycles - 15*5 = 75 rupees
Per cycle profit - 5 rupees
For 5 cycles - 25 rupees
A bit here is the main part - your purchase payment is just 10 rupees (I e first cycle)
Business profits are based on the number of cycles you run before the credit period.