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LONG TERM AND SHORT TERM FINANCING CHECKPOINT

LONG TERM AND SHORT TERM FINANCING CHECKPOINT - Long term...

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Long term financing is usually more expensive than short-term based on the theory of the form structure of interest rates. Long-term decisions relating to plant and equipment or market strategy could determine the ultimate success of the firm, short-term decisions regarding working capital verify whether the firm receives long term. To protect against the risk of not being able to afford adequate short-term financing in stretched money periods, you could rely on long-term to cover some short-term needs. By using long-term capital to cover part of short-term needs, the firm virtually assures itself of having adequate capital at all times. Short-term financing offers some advantages over more extended financial arrangements. As a general rule, the interest rate on short-term funds is lower than that on long-term funds. Stipulations used along with short-term: working capital: current assets, net working capital: current assets-current liabilities and factoring: selling of A/R. It is less
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