Financial Awareness - Risk, Stability & Emerging Finance
Which of the following loans is typically secured against stock or receivables and is used to finance short-term working capital needs?
Which of the following loans is typically secured against stock or receivables and is used to finance short-term working capital needs?
medium Q8 of 15
Step-by-Step Solution
Step 1: Identify loan secured against stock or receivables
Cash Credit is secured against stock or receivables and finances short-term working capital.Step 2: Differentiate from other loans
Demand Loan is usually unsecured, Term Loan is long-term, Bill Discounting involves bills of exchange.Final Answer:
Cash Credit → Option AQuick Check:
Cash Credit = secured against stock, short-term working capital ✅
Quick Trick: Cash Credit = secured by stock or receivables.
Common Mistakes:
- Confusing Cash Credit with Demand Loan due to short-term nature.
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