sources of funds
SOURCES OF SHORT TERM FUNDS
Referring to any investment, financial plan, or anything else lasting for one year or less. Short term investments and financial plans usually involve less uncertainty than long-term investments and financial plans because, generally speaking, market trends are more easily predictable for one year than for any longer period. Likewise, short-term financial plans are more easily amendable as a result of the short time frame. Short-term financial plans usually involve investing in short-term securities, such as T bills or commercial paper.
Short–term borrowing
Usually short-term borrowing is between 1- 3years.
Short-term bank loan payable within 1-3 years.
A bank overdraft - An overdraft is for a very short period. Interest on a bank overdraft is charged at a variable rate on the amount by which the company is overdrawn from day to day. The limit of the overdraft is set by the bank for different firms.
Accounts payable (trade credit) and accruals - Accounts payable are spontaneous sources of financing arising in the normal course of business and depend on the credit terms given. Accounts payable and accruals are considered to be interest free. They are deferred and paid later and therefore provide a free source of financing.
Commercial Paper - This is a short-term financial instrument issued in the form of unsecured promissory notes with a fixed maturity date. A promissory note is a written promise to pay at a fixed future date, the amount shown on the note.
Foreign Currency Markets (International Borrowing) - These are international markets dealing with foreign currencies. Funds are deposited with a bank outside the country of origin of the funds and the funds are then lent out on a short-term basis e.g. 3 months. Most foreign currency lending takes place between banks of different countries and is in the form of negotiable certificates of deposit.
SOURCES OF MEDIUM TERM FUNDS
Medium term borrowing is usually between 3-5
Referring to any investment, financial plan, or anything else lasting for one year or less. Short term investments and financial plans usually involve less uncertainty than long-term investments and financial plans because, generally speaking, market trends are more easily predictable for one year than for any longer period. Likewise, short-term financial plans are more easily amendable as a result of the short time frame. Short-term financial plans usually involve investing in short-term securities, such as T bills or commercial paper.
Short–term borrowing
Usually short-term borrowing is between 1- 3years.
Short-term bank loan payable within 1-3 years.
A bank overdraft - An overdraft is for a very short period. Interest on a bank overdraft is charged at a variable rate on the amount by which the company is overdrawn from day to day. The limit of the overdraft is set by the bank for different firms.
Accounts payable (trade credit) and accruals - Accounts payable are spontaneous sources of financing arising in the normal course of business and depend on the credit terms given. Accounts payable and accruals are considered to be interest free. They are deferred and paid later and therefore provide a free source of financing.
Commercial Paper - This is a short-term financial instrument issued in the form of unsecured promissory notes with a fixed maturity date. A promissory note is a written promise to pay at a fixed future date, the amount shown on the note.
Foreign Currency Markets (International Borrowing) - These are international markets dealing with foreign currencies. Funds are deposited with a bank outside the country of origin of the funds and the funds are then lent out on a short-term basis e.g. 3 months. Most foreign currency lending takes place between banks of different countries and is in the form of negotiable certificates of deposit.
SOURCES OF MEDIUM TERM FUNDS
Medium term borrowing is usually between 3-5
References: Retrieved from http://www.differencebetween.com/difference-between-long-term-and-vs-short-term-financing/#ixzz2ftRYzB2c on the 25th of september, 2013. Retrieved from http://www.ehow.com/list_6527638_difference-short-term-sources-finance.html#ixzz2ftBj1G7p on thr 25th of september, 2013.