Introduction to Short-Term Financing

Question 1

Identify at least five forms of short-term financing.

Answer 1

1. Trade accounts payable
2. Accrued accounts payable
3. Short-term notes
4. Lines of credit, revolving credit or letter of credit
5. Commercial paper
6. Pledging accounts receivable
7. Factoring accounts receivable
8. Inventory secured loans

Question 2

Describe the concept of short-term financing.

Answer 2

Short-term financing involves:

1. Obtaining funding through obligations (debt) that must be repaid within one year (current liabilities), or
2. The use of current assets to obtain funding