Current asset management and short term financing

Purpose of short term finance

Inadequate reporting d. Degree of Government regulations b. Trucking companies with voluminous accounts receivable in the form of freight bills are good candidates for the use of short-term financing such as factoring. Thus, it is both a short-term investment and a financing option for major corporations. Describe: available options 4. Another bank loan, the revolving credit agreement, is basically a guaranteed line of credit that carries an extra fee in addition to interest. Good Relations Will Avoid a.

Coordinate interaffiliate payment flows c. Good Relations Will Avoid a. Revolving credit agreements are often arranged for a period of two to five years.

Short term financing strategies

The ordering cost is R per unit and the carrying cost is R50 per unit per year. Annual demand is units per year. Short-Term Financing Objectives 1. Credit rating service. Unsecured bank loans include lines of credit and revolving credit agreements. Reason for Stockpiling: reduce risk of shipping delays Results of Stockpiling: Higher carrying costs F. Trade credit is a major source of short-term business financing. Glossary Purchases for which a buyer has not yet paid the seller. Short-term loans can be unsecured or secured. Bank fees charged for: 1. Establish centrally managed cash pool 2. Adjusting sales bonuses for cost of uncollected credit sales.

Investment of Excess Funds 5. Requirements: a. Briefly describe the three main types of unsecured short-term loans.

Short term financing sources

Selling price is R and cost is R per book. Efficiency and quality A small number of reliable suppliers - to deliver frequently and guarantee quality The aim of JIT is to reduce the total cycle time from raw material to sale 15 Just-in-Time continued… The Risks JIT has resulted in improvements in quality and reduction of costs But there are risks: the system is fully optimised, interdependencies are compounded and there are higher risks of shutdown companies should not rely on only one supplier for any component or material increases in insurance premiums and transportation costs higher risks of business disruption , increase in insurance risk and higher levels of inventory volatility of input pricing Hold inventories of components and materials that are critical, purchased from one supplier, and at a higher risk of disruption of supply. A line of credit specifies the maximum amount of unsecured short-term borrowing the bank will allow the firm over a given period, typically one year. High costs such as compensating balances c. The ordering cost is R per unit and the carrying cost is R50 per unit per year. Minimize risk without regard to cost. Inadequate reporting d. Credit Terms Should Consider 1. Methods to Expedite Cash Payments a. Its purpose? Too many banks b. Another bank loan, the revolving credit agreement, is basically a guaranteed line of credit that carries an extra fee in addition to interest. Inter-company loans b. Market structure c. Term loan: bank loan to a company, with a fixed maturity and often featuring amortization of principal 2.

Because accounts receivable are normally quite liquid easily converted to cashthey are an attractive form of collateral.

What is the EIR? Minimize expected cost.

types of short term finance

Factoring is widely used in the clothing, furniture, and appliance industries. A short-term loan comes due within one year; a long-term loan has a maturity greater than one year.

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Working Capital and Current Asset Management