The correct answer is option a. overdraft and option c. trade credit as these are examples of short-term sources of finance among given options.
The short-term source of finances can be explained as the loans or credit facility provided to an enterprise or business for a time period of less than one year. It helps in maintaining the liquidity and liabilities of enterprises.
Bank overdraft:
- A temporary arrangement to overdraw from an organization's current deposit account for a certain time limit allowed by the particular bank is known as an overdraft.
- Granted against securities provided by the organization, goods in stock, and other marketable possessions.
- The rate of interest charged on overdraft is comparatively higher than the rate on deposits.
Trade credit:
- The most common source of short-term finance available.
- If a firm buys any product or particular merchandise, and the supplier grants a period of time to pay for the product even it has already received a buyer called trade credit.
- There is no explicit interest cost
Learn more about the disadvantageous of trade credit:
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