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Factoring of Accounts Receivable
Spending money on revenue expenditure.
Raising equity finance or long term borrowings to buy non-current assets.
Selling off a segment of the business because it is unprofitable.
Raising short term finance to improve working capital.
Determining what proportion of profits will be retained by the company.
None of the above.
Represent contractual claims on a firms income and assets.
Can arise spontaneously from a firm's operations.
Are sources of funds for a firm.
Grow in line with an increase in trading operations.
Should be used to finance temporary movements in current assets.
Trade credit has an implicit interest cost.
Large firms tend to use trade credit more than small firms.
The total trade creit owed by a company at any point of time is termed "accounts receivable".
Trade credit arises from the time differential between receipt and payment for goods purchased by the business.
Trade credit is usually secured by a floating charge over the company's assets.