short term - Short term financing is required to meet...

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Short term financing is required to meet working capital requirement : The main sources of short term financing are: 1. Trade credit 2. Overdrafts 3. Short-term loans 1. Trade credit: Trade credit: Trade credit is also a great source of financing. Inventories are purchased on credit with payments between 30 to 90 days. Trade credit means seller is giving goods to buyer on credit and the one who is buying will pay for it later. Trade credit is given by seller firm to buyer firm. Trade credit range from 15 days to 3 months and it is given based on goodwill of the buyer. In a period of high inflation, purchasing via credit may be a very helpful in keeping costs down. However, it is important to account for the loss of discounts that supplier offer for early payment. 2. Overdraft: Businesses keeps current account with bank. When payments from a bank current account exceed income to the account for a temporary period, the bank finances the deficit by means of an overdraft. Business can withdraw more than they have deposited
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This note was uploaded on 08/23/2011 for the course ACCOUNTING 201 taught by Professor Stevejoseph during the Winter '11 term at Aarhus Universitet.

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short term - Short term financing is required to meet...

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