07 - Short Term Finance

  1. Working Capital
    A firm's investment in current assets.
  2. Current Assets
    Assets the firm expects to convert to cash within 12 months.
  3. Current Liabilities
    Assets the firm expects to pay within 12 months.
  4. Net Working Capital
    Difference between current assets and current liabilities.
  5. Liquidity
    Firm's ability to pay its bills on time.

    The ease and quickness with which a firm can convert its non-cash assets into cash, as well as the size of the firm's investment in non-cash assets vis-a-vis its short-term liabilities.
  6. Permanent Investments in Assets
    Assets will not be liquidated or replaced within 12 months.
  7. Temporary Investments in Assets
    Investments in assets that the firm plans on liquidating in less than 12 months.
  8. Trade Credit
    Credit made available by a firm's suppliers in connection with the acquisition of materials.

    - Accounts payable
  9. Bank Overdraft
    The bank allows a customer to place account into temporary debt.
  10. Overdraft Limit
    The maximum amount that a customer can borrow with an overdraft facility.
  11. Promissory Note
    Short-term financial instrument whereby the borrower (drawer) promises to repay the face value (at maturity) to the holder.

    • - Commercial paper
    • - One name paper
  12. Bill of Exchange
    Short-term financial instrument requiring the face value to be repaid on demand or at a specified date.
  13. Bank Bill
    Commercial bill that has been accepted or endorsed by a bank.
  14. Pledging
    Loan that uses the firm's accounts receivable as collateral.
  15. Factoring Accounts Receivable
    The outright sale of a firm's accounts receivable to another party (factor) who in turn bears the risk of collection.
Card Set
07 - Short Term Finance
211 - Short Term Finance