Which feature most clearly describes a bank overdraft as a source of short-term finance?
Correct answer: B. Funds can be withdrawn up to an agreed limit
- A. Finance is raised by issuing ordinary shares
- B. Funds can be withdrawn up to an agreed limit
- C. A fixed payment is made to suppliers
- D. Finance is generated by selling old equipment
Explanation
A bank overdraft allows a business to withdraw more money than its current bank balance, up to an agreed limit. Interest is normally charged on the amount actually used, making it flexible short-term finance.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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