FIN 610Lisa IodiceHomework 9 - FIN 610 Lisa Iodice Homework...

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FIN 610 Lisa Iodice Homework 9-4 How do cash forecasting and short-term borrowing strategies relate? Cash forecasting can help a treasury department anticipate the ups and downs with the seasonality of the operating cycle, including shortage of cash flows resulting from unexpected expenses or shifts in customer payment patterns. There are three options to choose from to fund growth in current assets : Aggressive: financing new current assets with liabilities having comparable maturities. Most beneficial when short-term financing is cheaper than long-term financing. Conservative: uses long-term sources of financing to meet working capital requirements.
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Unformatted text preview: Usually expensive under normal financial market conditions but reduces refinancing and interest rate risks. Moderate: a blend of the above two and the exact combination will hinge upon management’s risk preferences and the condition of the financial markets. If a strictly short-term strategy is appropriate, management must choose the short term option (lines of credit, commercial paper, asset-based loans) that best suits them, based on the effective cost of the financing. Zietlow, J., Hill, M., & Maness, T. (2014). Short-term financing. In Short-term financial management (4th ed., pp. 423-440). Cognella Academic Publishing....
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