Answer (A) is correct . Trade credit is a spontaneous source of financing because it arises automatically as part of a purchase transaction. Because of its ease in use, trade credit is the largest source of short-term financing for many firms both large and small.
Answer (B) is incorrect because Mortgage bonds and debentures do not arise automatically as a result of a purchase transaction.
Answer (C) is incorrect because The use of receivables as a financing source requires an extensive factoring arrangement and often involves the creditor’s evaluation of the credit ratings of the borrower’s customers.
Answer (D) is incorrect because Mortgage bonds and debentures do not arise automatically as a result of a purchase transaction.
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