From the following identify the short term, negotiable, self liquidating instrument used to finance the working capital requirements of business firms.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Commercial Bill
Option (1) Call Money — Incorrect. It is a very short-term loan between banks, repayable on demand. It is not a bill used for credit sales.
Option (2) Commercial Paper — Incorrect. It is an unsecured promissory note issued by large firms to raise short-term funds. It is not the self-liquidating bill that finances credit sales.
Option (3) Commercial Bill — Correct. A commercial bill is a bill of exchange used to finance the working capital needs of business firms. It is a short-term, negotiable, self-liquidating instrument used to finance credit sales. The seller can get cash early by discounting the bill with a bank.
Option (4) Certificate of deposit — Incorrect. It is an unsecured, negotiable instrument issued by banks. It is not used to finance credit sales.
Note: Although the chapter ‘Financial Markets’ was dropped from the NCERT textbooks during rationalisation, it has stayed in the NTA syllabus every year since 2022, except for 2025, and it is part of the syllabus again from 2026. This question is therefore based on the pre-rationalised NCERT, an extract from which is given below. NCERT (Pre-rationalised Edition):
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