Economics · Working Capital Financing
A small trading firm is analyzing its mix of short-term financing sources. The firm utilizes Trade Credit and Accruals, and plans to accept Public Deposits to manage working capital. Which of the following statements comparing these sources is TRUE?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1All three sources are examples of core current liabilities that must be funded 100% by the firm's Net Working Capital (NWC).
- 2Accruals and Trade Credit are regulated sources with a fixed maximum tenure of 180 days, whereas Public Deposits have no tenure restriction.
- 3Public Deposits are unsecured, carry a fixed interest cost, and are heavily regulated by the RBI/MCA, unlike spontaneous Trade Credit and Accruals.✓
- 4Trade Credit is a negotiated source of finance, whereas Accruals and Public Deposits are spontaneous and interest-free.
Correct answer
Public Deposits are unsecured, carry a fixed interest cost, and are heavily regulated by the RBI/MCA, unlike spontaneous Trade Credit and Accruals.
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