Discuss Forum
1.
Which of the following is not a source of short-term financing ?
- A. Trade credit
- B. Trade credit
- C. Trade credit
- D. Trade credit
Answer: Option D
Explanation:
Explanation: Retained earnings are long-term funds accumulated from profits and reinvested back into the business. They are considered a source of equity financing, not short-term financing. Short-term financing refers to funds used to cover immediate needs and typically repaid within a year. Trade credit, transaction loans, and lines of credit are all forms of short-term financing.
Why other options are incorrect:
Why other options are incorrect:
- Trade credit: This is a common practice where a business purchases goods or services and delays payment to the supplier. It's a readily available and often interest-free source of short-term financing.
- Transaction loan: Also known as a single payment loan, this is a short-term loan with a fixed repayment schedule. It provides a quick and direct injection of cash.
- Line of credit: This is a pre-approved credit facility that allows a business to borrow funds up to a specific limit as needed. It offers flexibility for managing short-term cash flow needs.
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