Which of the following is a common source of long-term financing for a corporation?

• A. Issuing corporate bonds
• B. Short-term bank overdraft
• C. Trade payables
• D. Petty cash funds

Answer: (A)

Verified step by step guidance

1. Understand the concept of long-term financing: Long-term financing refers to funds that a corporation raises to support its operations or investments for a period longer than one year. Common sources include issuing bonds, equity financing, and long-term loans.
2. Analyze the options provided: Review each option to determine whether it qualifies as a long-term financing source. For example, corporate bonds are typically issued for periods exceeding one year, making them a long-term financing source.
3. Evaluate 'Short-term bank overdraft': A bank overdraft is a short-term financing option, as it is typically used to cover temporary cash flow shortages and is repayable within a short period.
4. Evaluate 'Trade payables': Trade payables represent amounts owed to suppliers for goods or services purchased on credit. These are generally short-term liabilities and do not qualify as long-term financing.
5. Evaluate 'Petty cash funds': Petty cash funds are small amounts of money kept on hand for minor expenses. They are not a source of financing, let alone long-term financing. Therefore, the correct answer is 'Issuing corporate bonds,' as bonds are a common long-term financing method for corporations.