【财务管理英文课件】Short-TermFinancing.pptVIP

Chapter 11 Short-Term Financing Short-Term Financing Spontaneous Financing Negotiated Financing Factoring Accounts Receivable Composition of Short-Term Financing Spontaneous Financing Accounts Payable (Trade Credit from Suppliers) Accrued Expenses Spontaneous Financing Open Accounts: the seller ships goods to the buyer with an invoice specifying goods shipped, total amount due, and terms of the sale. Notes Payable: the buyer signs a note that evidences a debt to the seller. Spontaneous Financing Draft -- A signed, written order by which the first party (drawer) instructs a second party (drawee) to pay a specified amount of money to a third party (payee). The drawer and payee are often one and the same. Terms of the Sale Net Period - No Cash Discount -- when credit is extended, the seller specifies the period of time allowed for payment. net 30 implies full payment in 30 days from the invoice date. Terms of the Sale Seasonal Dating -- credit terms that encourage the buyer of seasonal products to take delivery before the peak sales period and to defer payment until after the peak sales period. Trade Credit as a Means of Financing $1,000 x 30 days = $30,000 account balance What happens to accounts payable if a firm purchases $1,500/day at net 30? $1,500 x 30 days = $45,000 account balance A $15,000 increase from operations! Cost to Forgo a Discount Approximate annual interest cost = % discount 365 days (100% - % discount) (payment date - discount period) Cost to Forgo a Discount Approximate annual interest cost = 2% 365 days (100% - 2%) (30 days - 10 days) = (2/98) x (365/20) = 37.2% Cost to Forgo a Discount Payment Date* Annual rate of interest 11 744.9% 20 74.5 30 37.2 60 14.9 90 9.3 * days from invoice date S-t-r-e-t-c-h-i-n-g Account Payables Cost of the cash discount (if any) foregone Late payment penalties or interest Deterioration in