An example of a spontaneous source of funds is:
A)short-term borrowing.
B)bank credit line.
C)trade credit.
D)commercial paper loans.

Question

Quizplus · Accepted Answer

Trade credit is a spontaneous source of funds because it arises automatically from the supplier-customer relationship and doesn't require any special arrangement or application. Trade credit allows a company to buy goods or services now and pay for them at a later date, typically within 30-90 days, without incurring interest expenses or collateral requirements. Therefore, trade credit can increase a company's liquidity and working capital without adding debt or diluting ownership. Short-term borrowing and commercial paper loans, on the other hand, are not spontaneous sources of funds because they involve a deliberate decision and negotiation between a borrower and a lender, typically with interest charges, fees, and covenants. A bank credit line is also not a spontaneous source of funds because it requires a pre-approved arrangement with a bank, often with collateral pledge and periodic reports.

An Example of a Spontaneous Source of Funds Is