Match each type or source of business capital listed on the left with its correct defining operational characteristic on the right.
- Bank OverdraftFlexible short-term credit facility allowing a commercial current account holder to draw funds beyond their balance up to a approved maximum limit.
- Equipment LeasingMedium to long-term arrangement enabling a firm to use capital assets by paying periodic rental fees without paying full capital purchase costs upfront.
- Debenture StockLong-term loan capital issued under the company's common seal, bearing a fixed interest rate payable regardless of company profitability.
- Factoring of DebtsShort-term financial arrangement of selling book debts or trade receivables to a financial institution at a discount for immediate liquid funds.
Answer
Bank Overdraft matches with the short-term facility allowing overdrawing a current account balance; Equipment Leasing matches with using assets via periodic rental charges; Debenture Stock matches with long-term borrowed capital carrying fixed interest; Factoring of Debts matches with selling accounts receivable at a discount for immediate cash.
Each business capital source corresponds to its specific tenure and financial mechanism: Bank Overdraft is a short-term facility for overdrawing current account limits; Equipment Leasing provides asset usage via periodic rental payments; Debenture Stock is long-term corporate debt requiring fixed interest payments under seal; Factoring of Debts converts accounts receivable into instant short-term cash at a discount.
Step-by-Step Solution
Key Concept
Classification of Business Capital by Duration, Source, and Legal Characteristics