...CHAPTER: SHORT TERM FINANCING Topics to be Covered: 1. Meaning and nature of short-term financing. 2. Sources of Short Term Financing. 3. Advantages of Short-Term Financing. 4. Disadvantages of Short Term financing. 5. Purpose of Short-Term Financing. 6. “Ideal Concept” of Short-Term Financing. 7. What is Trade Credit? 8. Reasons for the use of Trade Credit. 9. Factors determining the amount of Trade Credit used 10. Cost of Trade Credit 11. Who bears the cost of Trade Credit? 12. What is Bank Credit? 13. Distinction between Bank Credit and Short Term credit. 14. Characteristics of Short Term financing Meaning and nature of short-term financing: Short Term financing is that from of financing which embraces borrowing or lending of funds for a short period of time. It refers to the finance obtained on short term basis, usually one year or less in duration. Short term finance is secured for financing the current assets, for example, inventories. Short term finance is also known as working capital which is the excess of current assets over current liabilities. Current liabilities become due within one year and indicate the amount of short-term credit being utilized by the business. Practically all enterprises use the short-term credit as sources of finance. We find in the balance sheets of almost all the companies some kinds of current liabilities which are the indicator of...
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...When we think about short term financing we refer to any investment, financial plan, or anything else lasting for one year or less. Short term investment and financial plans usually involve less uncertainty than long term investments and financial plans, reason being market trends are more easily predictable for one year than for any longer period. Short term financial plans are more easily amendable as a result of the short time frame. A short term financial plan usually involves investing in short term securities, such as T bills or commercial paper. When we are discussing long term financing we are describing a plan, strategy, security, or anything else with a term longer than one year. The exact number of years varies according to the usage. A long term financial plan outlines investment and other financial goals for any time more than one fiscal year, while a long term bond has a maturity of 10 or more years. Anything long term involves more uncertainty than anything short term because market trends are more easily predict able in the short term. Planning for the long term is necessary one’s plan must be flexible to account for its inherent uncertainty. There’s totally difference when we look at both short term and long term financing when we think of buying a house or a car we are talking long term financing, on the other hand when we take out a payday loan it is talking about short term because we are paying that back within a week or so. References Financial...
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...There are many different types of short term financing including trade credit financing, Bank credit financing, and commercial paper financing. Trade credit financing is the most popular and includes approximately 40% of short term financing. Trade credit financing is when the seller of the goods gives an extended time for payment usually about 30-60 days, and can sometimes offer a cash discount. Businesses would choose this type of financing for the cash discount and because it does not have an interest rate. Bank credit financing usually prefers a self-liquidating loan because it ensures a built in repayment scheme. This is usually a 90-180 day agreement and the interest rate will vary depending on the customer’s credit risk. Also, this type of loan often requires a compensating balance requirement. Businesses would choose this form of lending if they need a longer time frame than trade credit or if they need things other than goods such as long term growth. Commercial paper financing is offered to large are prestigious firms and is issued at below the prime interest rate. This type of financing is a short term unsecured promissory note which does not have any compensating balance requirements. However, it does require the firm to maintain commercial bank lines of approved credit equal to the amount of outstanding paper, which is usually a lot lower than compensation balance requirements. Businesses would choose this loan over the others if they have the credit standings...
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...is one of the types of short-term loan that often used by a firm to continuing the operation of the firm. It usually takes two weeks to 3 years period of times and bridging loan is only a temporary financial arrangement and will often be settles in a couple of months. Bridge loan is lending money to help the organization to cover expenses until specific anticipated income arrives. Small businesses often take out bridge loans from their banks to cover expenses such as paying wages of staffs or materials purchases to keep producing. Bridge loans are typically charging a higher interest than conventional financing, to secure the loans the banks will take the property of the borrower to mortgage. The advantage of bridge loan is strictly short-term, as other loan like mortgages is the financing that geared toward long-term. As long-term loans makes the borrower harder to pay back due to the interest of debt is compounded every period of time. Furthermore, bridge loan is flexible and convenient because, the borrower can obtain a new loan when the previous loan is repaid in time. The firm is easier to operate the business by using bridge loan to cover the expenses. The drawback of bridge loan is it is types of short-term loan with relatively high interest rate or backed by some form of collateral such as real estate or motor vehicle. Also, the borrower has to settle the payment in time in order to obtain new bridge loan as bridge loan is strictly short-term, also the amount to pay...
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...Long-Term and Short-Term Financing Long-Term and Short-Term Financing There will come a time when the company will want to make improvements for the company, during this time the company will need more funding for new equipment, enhanced cash flow, new technology, and any other company expansion they want or ay need. It is normal for any business to have debts once in a while just to support the rest of their business operations. For this, the company may choose between long-term financing and short-term financing. They should determine the company’s needs and understand the difference between the two options before determining which of these options is most advantageous for the company. The best option for financing needs that last a year or less is short-term financing. Short-term financing will provide the company with enough capital needed. Promissory noted, short-term loans, inventory loans, over drafting, and letter of credits are part of short-term financing. Short-term loan will help the business by boosting the inventory orders, daily supplies of the company, and wage distribution aside from raising capital. Signing a short-term loan which is payable for six months is the best example of how short-term financing works. Thinking about it positively, he can use the profit from their sales to pay this loan. If the company is confident in paying the loan back on the due date they should use such loan. (Thompson, 2001) For a company that needs financing...
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...Long-Term and Short-Term Financing Long-Term and Short-Term Financing Long-Term and Short-Term Financing There will come a time when the company will want to make improvements for the company, during this time the company will need more funding for new equipment, enhanced cash flow, new technology, and any other company expansion they want or ay need. It is normal for any business to have debts once in a while just to support the rest of their business operations. For this, the company may choose between long-term financing and short-term financing. They should determine the company’s needs and understand the difference between the two options before determining which of these options is most advantageous for the company. The best option for financing needs that last a year or less is short-term financing. Short-term financing will provide the company with enough capital needed. Promissory noted, short-term loans, inventory loans, over drafting, and letter of credits are part of short-term financing. Short-term loan will help the business by boosting the inventory orders, daily supplies of the company, and wage distribution aside from raising capital. Signing a short-term loan which is payable for six months is the best example of how short-term financing works. Thinking about it positively, he can use the profit from their sales to pay this loan. If the company is confident in paying the loan back on the due date they should use such loan. (Thompson, 2001) ...
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...Long-Term Short-Term Financing Gwen Florence University of Phoenix June 19, 2012 Long-Term Short-Term Financing Both new and established businesses will find it necessary to incur debts during the course of business operations. Financing may be sought for a multitude of reasons – like smoothing cash flow, purchasing equipment, or expanding operations. The choice between short- and long-term financing options should be determined based on each business’ individual needs. To make that determination, businesses also need to understand when each type of financing is appropriate. For financing needs over a period of a year or less, sort term financing can be used to inject capital into businesses (Ross, Thompson, Christensen, Westerfield, Jordan, 2001). Short term financing options include short-term loans, letters of credit, promissory notes, over drafting, and inventory loans. These options are often used by businesses to cover day-to-day costs like supplies, inventory orders, and wages. Due to the nature of their shifting demands, seasonal businesses in particular often use short term finance arrangements. An example of short-term financing is a company signing a short-term loan in order to purchase more inventories. Proceeds from sales of goods would be used to repay the loan. This is appropriate only if the capital required by the firm can be paid off within the loan’s timeframe. For financing needs over a longer...
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...Long-Term and Short-Term Financing FIN/200 November 19, 2010 David Stretton Long-Term and Short-Term Financing All business owners make profit but they also acquire debt in the process of making money. In order to make money as a business owner you have to spend money to be successful. So, in order for a business to stay afloat the business owners may decide to purchase big ticket items that they really do not have the on hand revenue for. In order for a business owner to purchase these items or even expand the business they must decide what type of financing they need to do so. Depending on the businesses needs they could either choose to go with long-term financing or short-term financing. If a business owner wants to finance something for a shorter period of time like one year or less, then it is best for them to go with short-term financing. Short-term financing really depends on what the business owner needs the loan for. The options for short-term financing could include a line of credit, a note, pledging receivables, or even factoring (Block, Hirt, Danielsen, 2009). One example of a business owner using short-term financing would be to purchase inventory for the next year. Long-term financing is done when a business owner needs a bigger amount of money and they want to pay it back in a longer period than just one year. The long-term financing options could be a term loan, preferred stock equity, or even a secured or unsecured loan (Block, Hirt, Danielsen...
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...Determinants of firm Short term Financing behavior: Evidence from Listed firms in Pakistan Muhammad Shahbaz 0132-BH-BAF-10 Faizan Saeed 1091-BH-BAF-10 Session: 2010---2014 Department Of Economics GC University, Lahore Determinants of firm short term financing behavior:Evidence of Listed firms in Pakistan | Submitted to GC University, Lahore in Partial fulfillment to the requirement For the award of degree of BS (Hons) In Business Accounting and Finance By Muhammad Shahbaz Faizan Saeed Roll No | 0132 | BH | BAF | 10 | Roll No | 1091 | BH | BAF | 10 | Session: 2010-2014 Department Of Economics GC University, Lahore RESEARCH COMPLETION CERTIFICATE It is certified that the research contained in this dissertation titled “Determinants of firm short term Financing behavior: Evidence from Listed Firms in Pakistan”, has been carried out and completed by Mr. Muhammad Shahbaz (Roll No 0132-BH-BAF-10) and Mr. Faizan Saeed (Roll No 1091-BH-BAF-10) under my guidance and supervision. The quantum and the quality of the work, contained in this dissertation, are adequate for the award of Degree of BS (Hons.) in Business Accounting and Finance Date: ______________________ ___________________ Mr. Nisar Ahmed Supervisor Department of Economics ...
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...Memory Carmela Briggs Psychology111 9/24/13 Memory Long-Term Memory is what stores events, skills, and things that we need for functioning in everyday life. It is how we remember our names and the names of our friends, family, and the people we are often in close contact with. It is vital to remember skills such as how to brush our teeth, get dressed, cook food, ride a bike, drive a car, and learn in our educational system. Without it, we would need assistance just to get through everyday life. On the other hand, short-term memory only briefly stores information. When dealing with short term memory, you may hear something one moment and within a few seconds not be able to recall what you just heard. To go back a day later and try to recall that information may be challenging because the information is no longer there. In knowing this when it comes to studying its best to do it in a repetitive manner. The more you read and look over something, the better chance you have of getting it stored in your long-term memory. So when it is necessary to retrieve the information it is there. Looking over some material only once may serve no purpose when test time comes. The information may be placed in your short- term memory and may be gone moments after reading. So, for best results when trying to retain information at a later date it is always best to do it with the long term memory in mind. Attention Giving focused attention to what is being read helps to make better sense of...
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...Multi-store model of memory in 1968. The model had two distinct stores known as a Short-term store and a Long term store. The model also unravelled a stimulus from the environment known as the sensory register. The memory model elaborates three stages that take place from information passing to the sensory register then to the short-term memory and eventually stored in the long-term memory. The main features of the sensory register is its modality specific, therefore information is held in the same sense it is registered e.g a visual image is held as a picture in the person’s memory and taste is held as a taste. The capacity of the sensory register is quite large however it has a very brief duration of approximately half a second. A series of experiments have been conducted by Sperling in 1960 which discovered that the sensory register can hold at least nine items of modality specific information for a brief period of time. From the sensory register information can be lost or can be passed onto the short-term memory. The research was developed by Miller in 1956 called ‘The Magic Number Seven’ in which he discovered that the short-term memory can hold 5-9 items of information, with a capacity that can be extended by ‘chunking information’, e.g broccoli, cauliflower, Brussels sprouts and peas can be chunked as one item known as vegetables. In 1959 Peterson and Peterson discovered the duration of the short-term memory as approximately 18 seconds. However the Displacement theory states...
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...author will address short term memory, long term memory, and working memory, as well as encoding and retrieval in the memory process. The author will also describe the selected test and analyze the result of the memory test and evaluate variables associated with encoding information and ease of retrieval. Working memory, short-term memory, and long-term memory Working memory is the capacity to actively store information in the mind required to do difficult tasks such as comprehension, learning, and reasoning. According to Terry (2009) working memory can be defined as memory that is operational and can be recall at any given time. There are two distinct phases of storage, short-term memory and long-term memory. Short-term memory is the capability to recall information over a short period. Information is stored for a limited time in short-term memory before transferring to long-term memory. In other others, when information is processed in short-term memory, it then moves the information to long-term memory. Forgetting usually occurs with short-term memory, if information is not moved to long-term memory. Long-term memory is intended for storage of information over a long time. Information from the working memory is transferred to it after a few seconds. Unlike in working memory, there is little decay. The transfer of material from short- to long-term memory proceeds largely on the basis of rehearsal, the repetition of information that has entered short-term memory. Information...
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...Marijuana, which had once been considered as a lethal drug, is now seen as a mild drug and the number of people demanding it to be legalized has skyrocketed over the last couple of decades. And all this thanks to the media, which have played a pivotal role in bringing about a shift in people’s perception of marijuana. Long back, marijuana was considered as a typically lethal drug. Many movies, novels and celebrities were largely responsible for instilling in people such made up facts about marijuana. “Reefer Madness”, the 1936 cult hit, depicted marijuana as the primary cause for turning two teenagers into sex-crazed murderers. Novels such as “Badge of Evil”, “Casino Royale”, etc were used as strong propaganda against marijuana causing it to be considered as a violence inducing drug. Currently, marijuana does not have the lethal drug status anymore. If we happen to see someone smoking marijuana in a television program, we will definitely not get embarrassed. Although marijuana is illegal in many states of America, it is so popular and a recent study reveals that one in fifteen high school students smoke marijuana almost every day. The 21st Century considers marijuana as a medicine for many debilitating diseases and relief for chronic aches. No doubt, marijuana is a best remedy to increase appetite and thus resolve the weight loss problem in HIV patients. Similarly, marijuana is best to alleviate the intensity of pain in cancer patients who undergo chemotherapy. Marijuana...
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...factors that enhance or impede the flow of information in each step of the process and proactive and retroactive interference and how one counteract their effects; while studying in order to facilitate maximum retention via long-term memory. Finally, explanations of other kinds of forgetting and a discussion of strategies that can improve memory consolidation and retrieval will be discussed. A theory of human memory should not only identify a set of processes and stores, but also be able to help answer questions such as how long it will take to retrieve accessible information and when information will be forgotten or inaccessible. To do this, the theory must specify properties of the processes and stores. The basic memory processes are encoding, which is information that is coded or transformed so it can enter your memory. The second is storage. This stores and consolidates the information over time. And there’s retrieval, which allows you to get the information when needed. It’s important to know that when talking about encoding, there are three types: Acoustic meaning sounds, visuals meaning images and pictures, and semantic which gives meaning. The process of the memory model is Sensory Memory, Short Term Memory, and Long Term Memory. Sensory memory holds the sensation of a sensory stimulus for a brief period of time after the stimulus ends (Valdosta, 2011). There are two types of sensory models: iconic and echoic. Iconic holds visual trace for about...
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...EXPERIMENT NO. 1 NAME : BAYHON, AILEEN CLAIRE R. SCORE: DAY / TIME : W / 7 : 30 – 4 : 30 PM DATE : JUNE 25, 2014 INTRODUCTION TO EXPERIMENTATION ABSTRACT The introduction to experimentation aimed to familiarize with some of the logic of research. The materials and apparatuses were pen, paper, and watch with second hand. The procedure of the experiment was that the experimenter instructs the subject to write the alphabet backward (from Z to A) as rapidly as possible. There would be 5 trials of 30 seconds each with a one-minute rest between trials. After the first trial, S would report orally the number of letters written and estimated the number expected in the second trial. After the second, third, and fourth trials, S would report the number estimated, the number achieved and the number estimated for the next trial. After the fifth trial only the estimated and achieved scores were reported. As the trial repeats in the individual’s performance (subject), there was a rising in the achieved score. On the contrary, in trial 5, the achieved score fell comparing to the previous achieved scores in relation to the subject’s estimated score. In the grouped tally, the computation of the average is 0.2 indicated that the mean with its corresponding intervals below the computed average, failed to have a good performance in the experiment. On the other hand, mean with its corresponding intervals above the computed average, passed in having a good performance in the experiment...
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