BMF – MAY 2015 – L1 – SA – Q15 – Basics of Business Finance and Financial Markets

Identifying the most commonly used source of short-term finance for businesses.

Question

Which of the following sources of finance available to businesses is the most frequently used for short-term finance?

A. Bank borrowing
B. Rights issues
C. New share issues
D. Retained earnings
E. Trade credit

Answer

Answer: E. Trade credit

Explanation:
Trade credit is often the most frequently used source of short-term finance for businesses. It allows companies to buy goods and services and pay for them later, effectively helping manage cash flow and finance operational needs without immediate cash outlay.

Tags: Bank borrowing, Financial management, Short-term Finance, Sources of finance, Trade Credit
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2015

Uploader: Kwame Aikins