Question

Which of the following sources of financing is considered spontaneous because it fluctuates naturally with changes...

  1. Which of the following sources of financing is considered spontaneous because it fluctuates naturally with changes in ordinary business operations/transactions without management making formal decisions?

a.

Commercial paper

b.

Long-term bond

c.

Notes payable

d.

Trade credit

e.

Equity
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Answer #1

Spontaneous source of finance is one which arise out of routine operations. Can be done by without any special actions by company. It changes with normal operations of company without finalization from the management.

For examples. Trade credits, accruals etc.

Non spontaneous source of finance refers to this that do not occur from day to day operations. It has to be finalized by management decision.

For example. Commercial paper

  Trade credit is considered as spontaneous because it arises naturally in the course of business

Commerical Paper,Long Term bond, Notes Payable Equity are Non Spontaneous Source as it requires a set of action between the corporation and its parties.

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