Week 7 Checkpoint Short-Term Financing

Week 7 Checkpoint Short-Term Financing - Short-Term...

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Short-Term Financing 1 Short-Term Financing Melissa Krol FIN 200 October 20, 2010 Instructor: John Oladokun Axia College University of Phoenix
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Short-Term Financing 2 Short-Term Financing Trade credit is the most widely used form of short-term financing. When a company purchases product from another company and that company extends credit to the purchasing company is known as trade credit. A company’s accounts payable is a spontaneous source of funds, it grows as the business grows on a long-term basis and contracts when business is slow (Block, Hirt, & Danielsen, 2009). Credit is usually extended for 30 to 60 days and many companies try to draw out the payment period in order to have use of cash for as long as possible. Some trade credit have discounts and managers use formulas to figure out if it is worth it for the company to pay within the discount period or keep the cash until the payment is due in full. Bank credit is also a form of short-term financing.
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Week 7 Checkpoint Short-Term Financing - Short-Term...

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