Which of the following short-term sources of finance is primarily used by businesses?

Trade credit is a common short-term source of finance used by businesses. It allows a company to purchase goods or services on credit and pay the supplier at a later date, which can range from a few days to several months. This arrangement is beneficial because it enhances cash flow, allowing businesses to manage their working capital more effectively without needing immediate cash.

Utilizing trade credit provides operational flexibility, enabling companies to acquire inventory or supplies needed for production without upfront cash payments. This source of finance is especially prevalent among suppliers and manufacturers since it fosters ongoing relationships and encourages continued business growth.

In contrast, credit cards can also be a source of short-term financing, but they may come with higher interest rates and fees. Accrued expenses, while a liability that reflects expenses that have been incurred but not yet paid, do not typically constitute a source of financing in the same way that trade credit does. Long-term loans are explicitly designed for extended repayment periods and capital expenditures, making them a less suitable option for short-term financial needs.