Question
Which of the following are forms of long -term fince? (Select the correct answer from those listed below the following statements). (1) Retained earnings (2) Tighter credit control (3) Ordinary shares (4) Delayed payment to suppliers (5) No payment to suppliers (1) and (3) are correct (1) and (2) are correct All of the above are correct None of the above are correct
Answer
3.8
(164 Votes)
Grace
Elite · Tutor for 8 years
Answer
(1) and (3) are correct
Explanation
## Step 1: Understanding the questionThis is a multiple-choice question that circles around forms of long-term finance in a business setup. Long-term finance, to provide quick clarity, refers to the source of money for any project that is expected to pay back within more than a year period.## Step 2: Parsing through the optionsBefore jumping into the answers, we need to consider the possible choices first. Retained earnings and ordinary shares are indeed forms of long-term finance, staying in-stream within the organization and being revived through the resurgence of unpaid dividends or proceeds brought from selling shares, respectively. However, tighter credit control or delaying payment to suppliers never offer a source of long-term finance as holding back payments does not inherently strengthen the company's fiscal solvency for over a year. ## Step 3: Picking the correct answerWe already know that only (1) and (3) which are "Retained earnings" and "Ordinary shares", belong to long-term finance methods. It would therefore make sense for the statement to fall among Category (1) and (3) are correct instead of rest options.