ACCA F9考試：Short-Term Finance

1.Bank Overdraft

Advantages

Flexible.

Provides instant finance.

Disadvantages

Repayable on call, unless the bank offers a "revolving line of credit".

The interest rate charged is often both high and variable.*

2.Trade Credit

Trade credit involves either delaying/slowing payments to existing creditors or using more of the credit offered by suppliers.

Advantages

Generally cheap.

Flexible.

Disadvantages

May lose settlement (quick payment) discounts.

May lose suppliers' goodwill.

3.Bills of Exchange

Bill of exchange—an acknowledgement of a debt to be paid at some time in the future (e.g. by a customer). Such a bill may then be "discounted" (i.e. sold to a third party for a percentage of face value).

Advantages

Improves cash flow.

Flexible.

Disadvantage

Fees.

4.Commercial Paper

Commercial paper—short-term (usually less than 270 days), unsecured debt issued by high-quality companies. The paper can then be traded by investors on the bond markets

Advantages

Large sums can be raised relatively

cheaply.

No security is required.

Disadvantage

Only available to large companies with very good credit ratings.

5.Short-Term Bank Loans

Advantages

Available to most companies, assuming that there is a well-functioning banking system.

Short-term interest rates are usually lower than long-term interest rates, due to lower credit risk on short-term debt.

Disadvantages

Arrangement fees may be high when expressed as an annual effective cost.

Refinancing risk (rollover risk). Every time a short-term loan matures, the borrower faces the risk that it cannot be easily replaced or refinanced, or that interest rates have risen.