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Short-Term Business Financing

Chapter Learning Objectives:

AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO . . .

  • Identify and describe strategies for financing working capital.
  • Identify and briefly explain the factors that affect short-term financing requirements.
  • Identify the types of unsecured loans made by commercial banks to business borrowers.
  • Describe the use of accounts receivable, inventory, and other sources of security for bank loans.
  • Explain the characteristics, terms, and costs of trade credit.
  • Explain the role of commercial finance companies in providing short-term business financing.
  • Briefly describe how factors function as a source of short-term business financing.
  • Describe how the Small Business Administration aids businesses in meeting short-term borrowing needs.
  • Describe how and why commercial paper is used as a source of short-term financing by large corporations.

Where We Have Been...

The balance sheet identity is the following: total assets equals liabilities plus stockholders' equity. In other words, a firm's assets must be financed from one or a combination of two basic sources: debt and owner's equity. Among the assets that need to be financed ...

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