Question

“Public deposits, trade credit and bills discounting are sources of short term finance”.

Answer 1

1. Public Deposits: 
   • By taking deposits from the general public for a duration that usually ranges from six months to three years, businesses can raise short-term financing.
   • It is an easy and affordable method of raising money without sacrificing equity.
   • Generally speaking, public deposits have a greater interest rate than bank deposits and are unsecured.
2. Trade Credit: 
   • It describes the credit that suppliers give businesses so they can buy products and services on credit and pay for them later.
   • This type of short-term financing is well-liked since it aids in cash flow management for organizations.
3. Bills Discounting:
   • Accounts receivable (unpaid invoices) are sold at a discount to a bank or financial institution for quick cash.
   • Businesses gain liquidity without waiting for consumer payment.