Which of the following is a common source of short-term finance?

Short-term finance refers to funds that are needed for a brief period, often to cover operational expenses or for immediate cash flow needs. An overdraft is a common source of short-term finance because it allows a business to withdraw more money than it has in its bank account, effectively providing a flexible credit facility for urgent financial needs.

Businesses can access money quickly through an overdraft, and they only pay interest on the overdrawn amount for the time it is used. This makes it an effective tool for managing day-to-day expenses and navigating temporary cash flow challenges.

In contrast, a debenture generally represents long-term finance as it is a long-term debt instrument used to raise funds beyond one year. A savings account provides access to funds but is not typically used specifically for short-term business finance due to usually having lower interest and withdrawal restrictions. A fixed-term deposit involves locking in money for a specified term, making it impractical for short-term financial requirements, as the funds are not readily accessible until the term ends.