A firm will use spontaneous funds to the extent possible; however, due to credit terms, contracts with workers, and tax laws there is little flexibility in their usage.

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Spontaneous funds refer to the funds generated from internal sources, such as accounts receivable, inventory, and accounts payable. A firm typically tries to use these funds first before looking for external financing. However, due to various constraints such as contractual obligations, tax laws, and credit terms, there may be limited flexibility in the usage of these funds.

A Firm Will Use Spontaneous Funds to the Extent Possible;