Nobody downloaded yet

Short term finance sources - Essay Example

Comments (0) Cite this document
Summary
The intentions of this study are short term finance sources refer to sources that have to be repaid within a year. These are important tools which help in operating the business efficiently. The short term finances also help in making a long term strategy for the business. …
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER94.4% of users find it useful
Short term finance sources
Read TextPreview

Extract of sample "Short term finance sources"

Download file to see previous pages It is evident from the study that in today’s modern era, every business maintains a bank account of its own where it deposits the money it receives from the sales generated by the business. As the businesses expand, the ratio of their cash sales ratio decreases to the credit sales ratio, because of which the businesses can face difficulties in paying their short term and immediate expenses such as paying salaries of their work and the heating bill. This is when the businesses ask ‘their’ bank for an overdraft so that they can pay for their expenses. Bank overdraft is a form of loan given by the bank to its customers and businesses, where the customers and businesses are charged interest on the money spent by them. Another option that a business can exercise to pay for its expenditures and administrative costs is by arranging a short term loan from the bank. Any loan taken from the bank that has to be repaid within a year can be defined as ‘short term loan’. Trade credit is the number of days in which a business has to pay for the good it has received from the supplier. The number of days in which the payment has to be made for the business entirely depends on the working relationship between the supplier and the buyer. If the buyer has been maintaining a good reputation and has always being paying on time, the supplier may also go a little easy on the buyer by giving him enough time to arrange for the funds. Sale of unused assets: Most businesses only exercise this source of finance when all their sources of finance are have been used up. In this source of finance, funds are generated by selling unused fixed assets of a business or assets that the business is not making full use of, which may include extra machinery, buildings and vehicles. By selling the unused fixed assets, the business is able to generate enough funds to meet its requirements. In 2010, Lokul Oil used four sources of finance to meet their requirements which were, Trade Credit, Sale of investments, Sale of property and Sale of its subsidiary companies. To generate funds to meet its short term obligations, Lokul Oil had to sell its short term investments, which included bonds and other cash equivalents. In addition to that, Lokul Oil also sold some of its subsidiary companies to generate enough cash for the company so that they don’t have to arrange for a bank overdraft or short term loans to pay for the expenses. The company also sold some of its property that it had bought long time back for expanding purposes, in order to generate cash to meet the short term obligations of the company. On the other hand, the primary sources of finance that were used by Premier oil to finance its expenses were Trade Credit, Sale of unused assets and Sale of investments. Premier oil asked their suppliers to extend the payment time given to them so that they meet their other short term expenses first, and then, when they have enough funds, the suppliers will be paid. This helped in solving the problem of meeting short term obligations for Premier oil. Another source through which Premier Oil arranged for funds to meet its short term obligations was sale of its unused fixed assets, the assets that the company had in surplus. This included sale of property, offices, buildings, sites which were not profitable or were not generating enough revenue to meet the company’s demand. This source of finance helped in putting the idle money into use. Like Lukul Oil, Premier Oil also used sale of ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Short term finance sources Essay Example | Topics and Well Written Essays - 1500 words”, n.d.)
Retrieved from https://studentshare.org/management/1395619-short-term-finance-sources
(Short Term Finance Sources Essay Example | Topics and Well Written Essays - 1500 Words)
https://studentshare.org/management/1395619-short-term-finance-sources.
“Short Term Finance Sources Essay Example | Topics and Well Written Essays - 1500 Words”, n.d. https://studentshare.org/management/1395619-short-term-finance-sources.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Short term finance sources

The most common short term sources of finance that corporations use to generate funds

...? Module Semester In this report, we will be discussing the most common short term sources of finance that corporations use to generate funds, secondly, annual reports of two companies Premier Oil and LukOil will be compared, thirdly, the liquidity ratio and efficiency ratio of those will be compared and their financial position will be analyzed. Short term finance sources refer to sources that have to be repaid within a year. These are important tools which help in operating the business efficiently. The short term finances also help in making a long term strategy for the business. They can be used to pay for the salaries of the employees and other administrative costs. There are four most common short term sources of finance... to arrange...
6 Pages(1500 words)Essay

Various sources of short-term finance

...?Table of Contents Introduction……………………………………………………………………………….. 02 Sources of Short-term Finance...…………………………………………………………… 02 a) Trade Credit…………… ……….………………………………………………. 02 b) Bank Credit…...…………………………………………………………………. 02 a) Customer’s Advances…. ……….………………………………………………. 03 b) Loan from Cooperative Banks.………………………………………………….. 03 Comparison of Working Capital Performance……..………..…………………………….. 03 Liquidity Ratio………………………………………..……………………………………. 04 Efficiency Ratio……………………………………………………………………………. 05 a) Debtor Days…………….……….………………………………………………. 06 b) Creditor Days……………………………………………………………………. 06 c) Stock Turnover Days….………………………………………………………… 06...
5 Pages(1250 words)Assignment

Short Term Long Term Goal

...?Prompt: Please answer all parts below: Why are you seeking to pursue your MBA study at this moment of your life? Describe your short and long term career objectives. How will you measure your success? Who do you want to be in the future? What steps will you take to achieve your goal? Explain how an MBA will contribute to these goals. Coming from a family of entrepreneurs, I was taught early in life that while formal education can teach you how to earn a living, self-education can make you a fortune. That is why although I’ve already had a considerable amount of success in my business ventures owing to my raw talent and the aptitude for business that I have gained over the years, I realized that it was...
3 Pages(750 words)Essay

Short Term Long Term Goal

...understanding of sales and returns was inherent to me right from the start. Since then, I have never lost sight of my goals of pursuing entrepreneurship. In college, my friend and I started a clothing import company which enjoyed considerable sales. I also joined the companies of AXA Advisors, Philip Simon Developments USA, Inc and later Shoesapart, Inc. to learn fundamental business structures and to have an in-depth scope into daily business operations. Despite these developments, I know I can still be better. Thus, my short term goal is getting accepted to the CEIBS MBA program. My recent trip to China made me discover the great business potential that it holds. Not only does it offer accelerated and...
2 Pages(500 words)Essay

Sources of Finance

...the country-wise data of SMEs using venture capital as a means of financing either in early stages or for expansion purpose. It can be seen that SMEs in most of the countries used venture capital for expansion purposes than for start-ups. Figure 1: Venture Capital Investment 2000-2003 (% of GDP) (Source: OECD, 2006, p.6) 6. Short to medium term bank loans: Short-term loans are those where the repayments are done within one year whereas in medium-term loans the repayments are done between one to five years. This can be in the form of bank overdraft where the bank lets the business take out the money even if its bank...
12 Pages(3000 words)Essay

Long-Term Sources of Finance

...?Long-Term Sources of Finance Contents Contents 2 Introduction 3 Long-term Finances 3 Sources of Long-term Finance 4 Conclusion 11 References 13 Bibliography 13 Introduction This essay is a detailed analysis of a variety of long-term sources of finance along with their advantages and disadvantages. It also includes the suitability of each source of financing to different firms based on the kind of business stage the firm is in. The long-term finances for a firm are mainly of two types-...
8 Pages(2000 words)Essay

External Sources of Finance

...of new shares. Bank loans are normally long-term sources of finance and can always be obtained in large sums unlike other sources. In most cases, loans are used to buy fixed assets such as vehicles and machinery. The major disadvantage of using loans as sources of finance revolves around the huge interests paid (Gopalan 67). Most banks charge very high interest rates and it therefore becomes unprofitable to acquire loans without the assurance that the business will raise sufficient profits to cover for the high interest rates. Short term loans can also be obtained in form of overdrafts in which case most...
4 Pages(1000 words)Essay

Managing Finance - short- term debts and liabilities

...Managing Finance Part A: Working Capital Working capital is basically what an investor/entrepreneur/business owner is left with after deducting current liabilities from current assets. It is an indication of the liquidity of any business. More the working capital, more liquid is the business thought to be. Companies that have a good working capital can do their day-to-day functions well and their operating expenses have a good amount to get covered by. (Working Capital Definition, 2008) Many companies with even good profitability figures, face problems in running and dealing with their short- term debts and liabilities. To make sure that a business keeps running itself efficiently, it...
6 Pages(1500 words)Essay

Long-term Sources of Finance

...Long-term Sources of Finance Businesses need fixed assets like factory and office buildings, plant and machinery, and vehicles for which funds on large scale are required. Besides, funds for Research and development, patent and copy rights, advertisement for products launch are required on long-term basis. It is not desirable to use short term funds because of higher rate of interest and because of their limited availability. If the short term funds are diverted for long-term purposes, business will suffer for want of working capital required for inventory, bills receivable and operating expenses. Hence to meet the requirement of long-term capital, there are long-terms sources of finance which the business should seek for ensuring... to...
14 Pages(3500 words)Essay

Short Paper: Analyzing Sources

...9 September Source Analysis of the “Letter of Juan Rogel to Francis Borgia, 1572” On August 28, 1572, Father Juan Rogel wrote to Father Francis Borgia. Rogel described how he and his crew rescued the Spanish young boy Alonso, who survived the Indian Massacre at Ajacàn.1 The letter also illustrated how the Spaniards took revenge and killed many Indians. This paper analyzes the content, evidence, and inquiries of this primary document. The context of the document is the colonization of the New World, or the Americas. During this time, Europeans travelled to the Americas to establish new colonies. The white settlers believed that they had the noble goals of civilizing the Indians by assimilating them and teaching them...
2 Pages(500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Short term finance sources for FREE!

Contact Us