Which form of short-term financing is similar to a credit card in that you have a maximum credit limit you can borrow against at any time and you pay interest only on the amount of funds you have used?
A) factoring
B) line of credit
C) trade credit
D) equity financing

Question

Quizplus · Accepted Answer

A line of credit is the best choice since it functions similarly to a credit card, providing a maximum credit limit that a business can borrow against as needed. Interest is only charged on the amount borrowed, making it an efficient way to manage short-term cash flow needs. Factoring involves selling accounts receivable to a third party for cash, trade credit extends credit terms from suppliers, and equity financing involves selling ownership in a business to raise funds, none of which are as similar to a credit card as a line of credit.

Which Form of Short-Term Financing Is Similar to a Credit