Question

Which one the following is a short term finance?

• A. Issue of debentures
• B. Ploughing back of finance
• C. Trade credit
• D. Public deposits

Answer 1

Answer:

C. Trade credit

• Trade credit (Short-term): Credit extended by suppliers to buyers, allowing them to purchase goods or services now and pay later (typically within 30 to 90 days). It is a short-term source used to fund day-to-day working capital needs.

• Issue of debentures (Long-term): Used by companies to raise debt capital for long periods (usually 5 to 10+ years).

• Ploughing back of profits / retained earnings (Long-term): Reinvesting net profits into the business for long-term growth and capital expenditure.

• Public deposits (Medium to Long-term): Direct deposits invited from the public by companies, usually ranging from 6 months to 3 years.