Tag: short term sources of finance

Questions Related to short term sources of finance

Trade credit as a source of funds has certain limitations, which is/are ______________________.

organisation of commerce and management sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

  1. Only limited amount of funds can be generated through trade credit.

  2. It is generally a costly source of funds.

  3. Availability of easy and flexible trade credit facilities may induce a firm to indulge in over-trading.

  4. All of the above

Show answer
Correct Option: D
Explanation:
Trade credit is issued when goods and services are traded on credit. It is offered by one seller to the other.a) Trade credit as a source of funds has certain limitations, which are:b) limited amount of funds can be generated through trade credit.
c) It is generally a costly source of funds.
Availability of easy and flexible trade credit facilities may induce a firm to indulge in over-trading.

Match the items of List-I with the items of List-II:

List-I List-II
(a) Trade credit and other payables that arise in the firm's day-to-day operations (i) Maturity Financing
(b) Financing and asset needs over time (ii) Factoring
(c) A tool for accelerating the collection from the customers (iii) Spontaneous financing
(d) Seeking financial service to finance on its debtor's balances (iv) Lockbox system
organisation of commerce and management sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

  1. $(a) - (iv), (b) - (iii), (c) - (ii), (d) - (i)$

  2. $(a) - (iii), (b) - (ii), (c) - (iv), (d) - (i)$

  3. $(a) - (ii), (b) - (iv), (c) - (i), (d) - (iii)$

  4. $(a) - (i), (b) - (ii), (c) - (iii), (d) - (iv)$

Show answer
Correct Option: C

Trade credit is commonly used by business organisations as a source of ___________ financing.

organisation of commerce and management sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

  1. Short-term

  2. Long-term

  3. Medium-term

  4. Both A and C

Show answer
Correct Option: A
Explanation:

Trade credit is commonly used by business organisations as a source of short-term financing. Trade credits are generally a small amount of finances that are provided by the traders to another trader or a company to ensure smooth flow of trade cycle in the supply chain.

Trade credit is the credit extended by one _________ to another for the purchase of goods and services.

organisation of commerce and management sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

  1. Retailer

  2. Wholesaler

  3. Customer

  4. Trader

Show answer
Correct Option: D
Explanation:

Trade credits are the credits granted to manufacturers and traders by the suppliers of raw materials. These credits are given to a trader from another trader to ensure the smooth running of trades in a business supply chain.

Trade credit is a convenient and continuous source of funds, which is one of the __________ of trade credit.

organisation of commerce and management sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

  1. Limitations

  2. Merits

  3. Functions

  4. Objectives

Show answer
Correct Option: B
Explanation:

Trade credit is a short term source of finances where a trader credits finances to another trader for the smooth flow of business. Trade credit is a convenient and continuous source of funds as it is a short term credit and has a low amount value hence can be taken without long term financial plannings. This is one of the merits of trade credit.

Trade credit is needed to promote the ________ of an organisation.

organisation of commerce and management sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

  1. Purchases

  2. Sales

  3. Drawings

  4. Capital

Show answer
Correct Option: B
Explanation:
Trade credit is commonly used by business organisations as a source of short-term financing. It is granted to those customers who have reasonable amount of financial standing and goodwill.If an organisation wants to increase
its inventory level in order to meet expected rise in the sales volume in the near future, it may use trade credit to, finance the same.