CHAPTER 4: SOURCES AND USES OF SHORT TERM  used to generate investment income through capital

AND LONG TERM FUNDS appreciation in stock investments or trading through

bond investments
 Accounts receivable - increase sales by making
4.1 SOURCES OF FUNDS FOR BUSINESS OPERATIONS buying more attractive to the customer with the
availability of credit
FUNDS 3. Inventory
 Supply of capital belonging to numerous investors  “product roster”
 Money, investment, finance, budget,  The more interesting it is, the greater potential sales
 what you use to buy for your business
SHORT TERM FUNDS LONG TERM FUNDS
 For daily business operations’ working capital  Used for start-up business requirements, capital
 Sources of fund expenditures, or business expansion
a. Bank loans  Ex. Invest in a building or equipment that will sustain the
b. Credit from suppliers growth of his operations
c. Accrued liabilities  Long-term funds in a corporate setup: Debt or Equity from
 Used to finance current assets: investing public
a. Accounts Receivables (AR)  Acquire debts by issuing bonds, raise capital by issuing
b. Inventories stocks (common and preferred)
 sales bought on credit; inventory to be paid
 short term fund will provide cash to pay for debts or BANKS
expenses (ex. purchase of inventory)  financial intermediary that brings together depositors
 Debt only and borrowers
 One year loan or less  major source of funding for working capital requirements
 regulated by the Bangko Sentral ng Pilipinas (BSP)
FUNDING WORKING CAPITAL
 Working capital  Current assets used in operations 1. Commercial Banks
a. Cash  Clients are mostly retail customers
b. Cash equivalents or marketable securities  main business is lending
c. Accounts receivables  Transactions are many and usually not very large in
d. Inventory size
 Sources of working capital:
 put up many branches in different locations  to be
a. Savings account
closer to their market so that they may service them
b. Current accounts
better and faster
 Larger commercial banks in the Philippines: BDO,
UnionBank, Metrobank, and BPI
Balance
Sheet 2. Universal Banks
 Banks that are licensed to do more sophisticated
Total Liabilities banking services than commercial banks
Total Assets
and Equity
 Clientele comprises of the top corporations of the
Current Long Term Current country and global businesses
Assets Assets Liabilities  Lend to these top business conglomerates
 Manage their corporate funds
Cash Long Term
Debt  Invest their portfolio
Cash equivalent/  Advise these companies on financial market
Marketable Stockholders'
Securities Equity movements and directions
 transactions are usually bigger in size, multicurrency,
Accounts
Receivable and global in nature

Inventory 3. Investment Banks

 They are similar to universal banks in terms of
USES OF WORKING CAPITAL sophisticated banking services.
1. Net working capital or working capital  They have no branches all around the
 current assets less current liabilities country
 Helps carry out the normal operations of business  They are more specialized and deal
 Used to generate sales and profits for a business with top corporations, global businesses, and
 Cash uses governments
 to be invested in inventory  Their marketing making activities are:
 pay off short-term obligations to reduce the cost o Trading
of doing business o Fund Management
o Portfolio Management

2. Marketable securities