Accruals represent a source of "free" financing in the sense that no explicit interest is paid on these funds.

Question

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Accruals refer to expenses that a company has incurred but has not yet paid for, or revenues that have been earned but not yet received. These can serve as a form of financing because they represent funds that a company can use before they have to be paid out. Since interest is not explicitly paid on these funds, they can be seen as a source of "free" financing.

Accruals Represent a Source of "Free" Financing in the Sense