Financial Awareness - Risk, Stability & Emerging Finance
Which of the following is a short-term loan facility that allows a borrower to withdraw funds up to a sanctioned limit to meet working capital requirements?
Which of the following is a short-term loan facility that allows a borrower to withdraw funds up to a sanctioned limit to meet working capital requirements?
easy Q13 of 15
Step-by-Step Solution
Step 1: Identify the loan purpose
Cash Credit is a short-term loan to meet working capital needs with a sanctioned limit.Step 2: Differentiate from similar loans
Overdraft also allows withdrawal beyond balance but is usually linked to current accounts; Cash Credit is specifically for working capital. Term Loan is long-term, Demand Loan is repayable on demand.Final Answer:
Cash Credit → Option DQuick Check:
Cash Credit = short-term working capital loan ✅
Quick Trick: Cash Credit = working capital short-term loan.
Common Mistakes:
- Confusing Cash Credit with Overdraft due to similar withdrawal features.
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