February 2, 2013

SYNTHESIS PAPER ON SHORT-TERM BORROWING

Synthesis Paper on Short Term Borrowing

By John Michael G. Favila

When we think about short term financing we refer to any investment, financial plan, or anything else lasting for one year or less. Short term investment and financial plans usually involve less uncertainty than long term investments and financial plans, reason being market trends are more easily predictable for one year than for any longer period. Short term financial plans are more easily amendable as a result of the short time frame. A short term financial plan usually involves investing in short term securities, such as T bills or commercial paper. When we are discussing long term

financing we are describing a plan, strategy, security, or anything else with a term longer than one year. The exact number of years varies according to the usage. A long term financial plan outlines investment and other financial goals for any time more than one fiscal year, while a long term bond has a maturity of 10 or more years. Anything long term involves more uncertainty than anything short term because market trends are more easily predict able in the short term. Planning for the long term is necessary ones plan must be flexible to account for its inherent uncertainty. Theres totally difference when we look at both short term and long term financing when we think of buying a house or a car we are talking long term financing, on the other hand when we take out a payday loan it is talking about short term because we are paying that back within a week or so.

References: Financial Dictionary by Farlexfinancial statements to meet its unique objectives.

JOHN MICHAEL G. FAVILA

FINANCIAL MANAGEMENT