2.2 Flashcards
1
Q
How long is a short term borrowing?
A
Up to 1 year.
2
Q
Which 4 principles impact the choice of borrowing instrument?
A
- availability
- flexibility
- diversification
- cost
3
Q
What is the availability of short term finance dependent on?
A
- liquidity in the relevant market
- creditworthiness of borrower
4
Q
Why is flexibility useful for short term borrowing?
A
When there is uncertainty regarding timing and size of cashflows.
5
Q
Why should borrowing sourced be diversified?
A
To reduce refinancing risk and counterparty risk
