Question

Identify two sources of working capital or short-term capital.

Explain any four sources of working capital.

Answer 1

1. Commercial Banks: Provide loans, overdrafts, and cash credit facilities to meet the business’s short-term financial needs.
2. Public Deposits: Businesses may accept deposits from the public for a short duration to finance their working capital requirements.
3. Trade Credit: Trade credit is the credit period granted by suppliers for the purchase of goods and services. It is a short-term source of finance and helps a business manage its day-to-day operations without immediate cash outflow.
4. Factoring: Factoring involves selling accounts receivable (invoices) to a financial institution (the factor) at a discount. This provides immediate funds to the business, improving liquidity and working capital availability.