07 - Short Term Finance
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A firm's investment in current assets.
Assets the firm expects to convert to cash within 12 months.
Assets the firm expects to pay within 12 months.
Net Working Capital
Difference between current assets and current liabilities.
Firm's ability to pay its bills on time.
The ease and quickness with which a firm can convert its non-cash assets into cash, as well as the size of the firm's investment in non-cash assets vis-a-vis its short-term liabilities.
Permanent Investments in Assets
Assets will not be liquidated or replaced within 12 months.
Temporary Investments in Assets
Investments in assets that the firm plans on liquidating in less than 12 months.
Credit made available by a firm's suppliers in connection with the acquisition of materials.
- Accounts payable
The bank allows a customer to place account into temporary debt.
The maximum amount that a customer can borrow with an overdraft facility.
Short-term financial instrument whereby the borrower (drawer) promises to repay the face value (at maturity) to the holder.
- - Commercial paper
- - One name paper
Bill of Exchange
Short-term financial instrument requiring the face value to be repaid on demand or at a specified date.
Commercial bill that has been accepted or endorsed by a bank.
Loan that uses the firm's accounts receivable as collateral.
Factoring Accounts Receivable
The outright sale of a firm's accounts receivable to another party (factor) who in turn bears the risk of collection.
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