Question : Which of the following is a long-term source of finance?
Option 1: Trade credit
Option 2: Bank overdraft
Option 3: Debentures
Option 4: Factoring
Correct Answer: Debentures
Solution : The correct answer is (c) Debentures
Debentures are a long-term source of finance. They are long-term debt instruments issued by companies to borrow funds from investors. Debentures have a predetermined maturity period, typically ranging from 5 to 30 years, making them a long-term source of financing for the issuing company. Debentures are usually unsecured and carry a fixed rate of interest, which is paid to debenture holders at regular intervals. The interest payments and the repayment of the principal amount are made over the tenure of the debentures.
Question : Which of the following represents a short-term source of finance?
Option 1: Equity shares
Option 2: Debentures
Option 3: Bank overdraft
Option 4: GDRs
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