Trade credit
Accrued expenses
Provision for dividend
All of the above
Answer is Right!
Answer is Wrong!
The correct answer is: C. Provision for dividend.
A spontaneous source of short-term funds is a source of funds that arises naturally from the firm’s operations. Trade credit, accrued expenses, and short-term loans from banks are all examples of spontaneous sources of short-term funds.
A provision for dividend is not a spontaneous source of short-term funds. A provision for dividend is a liability that a company records when it declares a dividend. The company must pay the dividend out of its cash flow, which is not a spontaneous source of funds.
Here is a brief explanation of each option:
- Trade credit: Trade credit is a form of short-term financing that a company receives from its suppliers. When a company buys goods or services on credit, it is essentially borrowing money from its suppliers. Trade credit is a spontaneous source of funds because it arises naturally from the company’s operations.
- Accrued expenses: Accrued expenses are expenses that a company has incurred but has not yet paid. For example, if a company has not yet paid its employees for the current month, the wages that are owed to the employees are considered accrued expenses. Accrued expenses are a spontaneous source of funds because they arise naturally from the company’s operations.
- Short-term loans from banks: Short-term loans from banks are a form of short-term financing that a company can obtain from its bank. Short-term loans from banks are a spontaneous source of funds because they arise naturally from the company’s operations.
- Provision for dividend: A provision for dividend is a liability that a company records when it declares a dividend. The company must pay the dividend out of its cash flow, which is not a spontaneous source of funds.