Question

Which of the following is a spontaneous source of finance? Outstanding expenses Public Deposits Factoring Bank Overdraft​

Answer 1

Answer:

Sources of working capital can be spontaneous, short term and long term. Spontaneous working capital includes mainly trade credit such as the sundry creditor, bills payable, and notes payable. Short term sources are tax provisions, dividend provisions, bank overdraft, cash credit, trade deposits, public deposits, bills discounting, short-term loans, inter-corporate loans, and commercial paper. Long-term sources are retained profits, provision for depreciation, share capital, long-term loans, and debentures.

Answer 2

Explanation:

The two segments of working capital viz., regular or fixed or permanent and variable are financed by the long-term and the short-term sources of funds respectively. The main sources of long-term funds are shares, debentures, term- loans, retained earnings etc.

The sources of short-term funds used for financing variable part of working capital mainly include the following:

. Loans from commercial banks

. Public deposits

3. Trade credit

4. Factoring

5. Discounting bills of exchange