Question

Jasdeep purchased a new car worth ₹9 lakhs and paid ₹1 lakh to the car dealer. She asked him to accessorize it with an enhanced music system and velvet seat covers. The car dealer told Jasdeep to pay the remaining amount after customization.
Identify the short-term source of capital used by the car dealer.

Hint:

Trade credit is a short-term source of capital that allows businesses to delay payments for goods and services purchased, which helps in managing cash flow.

Answer 1

In this case, the car dealer is offering Jasdeep the option to pay the remaining amount after the car has been customized. This indicates that the car dealer is using a form of credit to fund the customization. The short-term source of capital used by the car dealer here is likely trade credit, where the dealer allows the customer to make a partial payment upfront and the remaining amount after a certain period (in this case, after the customization of the car).
Final Answer:
The short-term source of capital used by the car dealer is trade credit.