Chapter 11
Short-Term Financing
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Learning Objectives
After studying Chapter 11, you should be able to:
•
Understand the sources and types of spontaneous
financing.
•
Calculate the annual cost of trade credit when trade
discounts are forgone.
•
Explain what is meant by "stretching payables" and
understand its potential drawbacks.
•
Describe various types of negotiated (or external) short-
term borrowing.
•
Calculate the effective annual interest rate on short-term
borrowing with or without a compensating balance
requirement and/or a commitment fee.
•
Understand what is meant by factoring accounts receivable.