Short term financing

Manager who take financial decision I cluding decisions related to managing money, maximing
profit and wealth of shareholder
Short term mean less than 1 year day to day operations
Need when shortage of cash Cash outflow more than inflow
Short term do use current asset
Cash inflow finish in reserve
Cash outflow
Cash can be gemerated through
Different type of ca
Acc recievable payong money of acc recievable
Invemtory can be sold
2 type of CA
1. Acc recievable
2. Inventory
Acc receivable decrease or slow down or inventory slow down so company require to go for
earning excess finance
Onventory is goods in warehouse. Short term needed when those are not being sold
How and from what sources company can generate cash?
1. Spontaneous finance
Random inmmediately, quickly, earn cash quickly
These use internal sources of finance
Cash generate through within boundaries of companies
2. Negotiating finance
Commiting finance any kond of contratc made
External source of finance
Loan
Company ke boundary ke bahir se khareedte.
Outside of company
Company borrow from bank
3. Factoring
 Company hire favtor to earn acc recievable
People or organization are factor
Tgey earn acc recievable to recover money
Are paid commision
A contract os aogned with them
4. Composition
Diff proportion of mixture is made through which money is recovered
For example 20% spontaneous, 10% factoring 70% negotiating
Mixture of all financial sources,a portfolio made
2 slide
Spontaneous finance
Operating cycle
It is time from which u receive raw material tilll time u are paid cash
Debtor collection in days
1. Acc payable
Within 30 days debtor pay to creditor 30 days, cash is generated spontaneously and u can use it.
Acc payable can be stretched and effectively delay paying cash.
Compny reputation is managed and not affected megatively by managing acc payable and
expenses effectively.
Stretching acc payable to some extent so that you can earn cash to meet daily expenses
2. Accrued expense
Expense payed on every 1st month
Prepaid expense is ehen you have payed it before time of payment
Delay payment is payment in future which is outstanding payment ( eg 5th feb payment 7th
payment)
Accued expebse is outstanding expense
3. Trade credit
Internal source of finance
Any company or brand that give loan
Protector and gamble has diff product
Gourmet has many doff product bakery, furniture, catering
 Catering suffering in COVID and revenue declined so gourmet bakery or furniture can
privide for catering too
A company product under same umbrella provide for unde rpeoduct
4. Trade acceptance
Pay order
Future main payment payment to give to banks.
Demand draft
Both term same
Uni may demand them before admission
When company give loan so they may demand pay order
These are paid at some future time
Company can use finance available earned through pay order
5. COD and CBD
Online buying show payment on cash on delivery
It basically states cash on delivery.

12 feb bought expense incur delay future payment till 17 feb

How money is managed and generate dta a particular time
Cash on delivery
For buyer cod is better
Cash before delievery it is most secure for seller.
This is required for shipment.
If company imports from abother country
For seller
6. Net period
3/11, net 30
Full payment is in 30 days
If you pay in 11 have dixcount of 3%
If company doesn’t pay in 11 days, cost incurred so company will nedd to manage it
Company cost is measured in this
Measuring cost of paying in due time
 7. Seasonal dating
Defer payment means stretch
Season main revenue generate
Generate sale andmake payment in future.
Generate cash enough to pay back the cost incured
Wuickly arrange cash after earning cash from seasonal product

Numerical
1. Trade credit
Company increase acc payable the more it will increase, more excess cash will be available
company will be able to pay in future
Stretch acc payable
Acc payable are the one that purchase raw material and use it for production and sale. Through
this sale, company are payed
Exceess of 15,000 will be available that is arranged from inside firm in order to meet day to day
activity.
Increase amount per day or stretch acc payable
2. Cost to forgo a discount
When u do not utilise discount
This is abailed by company
Fianncial manager do it to estimate cost for forgoing discount
Rate decline as days increase

Negotiating finance
Money market credit is loan
Madkst is where buyer meet and sell there are different market eg capital money market

Money market is where short term financing trading take place

Eg on short term basis less than one year securotoes are floated.
Investment is made to earn profit by investors in short term securities.

Short term sec are bought by investor to make investment.

Commercial papers
Bankers acceptance