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Short-term financing is money that will be used for one year or less and then repaid
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1. Short-term financing is money that will be used for one year or less and then repaid.
There are many short-term financing needs. Two deserve special attention. First, certain necessary business practices may affect a firm's cashflow and create a need for short-term financing.
Cashflow is the movement of money into and out of an organization. The ideal is to have sufficient money coming into the firm, in any period, to cover the firm's expenses during that period. But the ideal is not always achieved. For example, a firm that offers credit to its customers may find an imbalance in its cash flow. Such credit purchases are generally not paid until thirty or sixty days (or more) after the transaction. Short-term financing is then
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needed to pay the firm's bills until customers have paid their bills. Unanticipated expenses may also cause a cash-flow problem.
A second major need for short-term financing that is related to a firm's cash-flow problem is inventory.
Inventory requires considerable investment for most manufactures, wholesalers, and retailers. Moreover, most goods are manufactured four to nine months before they are sold to the ultimate customer. As a result, manufacturers often need short-term financing. The borrowed money is used to buy materials and supplies, to pay wages and rent, and to cover inventory costs until the goods are sold. Then, the money is repaid out of sales revenue. Additionally, wholesalers and retailers may need short-term financing to build up their inventories before peak selling periods. Again, the money is repaid when the merchandise is sold.
2. Long-term financing is money that will be used for longer period than one year. Long-term financing is needed to start a new business. It is also needed for executing business expansions and mergers, for developing and marketing new products, and for replacing equipment that becomes obsolete or inefficient.
The amounts of long-term financing needed by large firms can be very great.
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Exercises
I. Translate into Russian.
Income; profit; facility; sales revenue; expense; source; term; short-term financing; long-term financing; cash; cash flow; expand; provide; obtain; purchase; affect; be available; repay; borrow; transaction; supplies; marketing; equipment; merger; retailer; wholesaler; manufacturer; imbalance; merchandise; inventory; rent; sales revenue.
II. Find the English equivalents.
Финансовые потребности; арендная плата; стоимость; изготовитель; оптовый торговец; розничный торговец; (торговая) сделка; доход от продажи; припасы; товары; слияние (предприятий); определение; товарные запасы; оборудование; продажа; доход; прибыль; расход; срок; краткосрочное финансирование; долгосрочное финансирование; денежная наличность; движение наличности; обеспечивать; изменяться; покупать; быть в наличии; предлагать; заменять; влиять (на); конечный; устарелый; неэффективный; непредвиденный; тщательный.
III. Fill in the blanks.
1. Financial management begins with a determination of the firm's... .
2. Temporary financing may be needed when ... are high and ... is low.
3. In these cases the firm must look for outside ... of financing.
4. Short-term financing is ... that will be used for one year or less and then ....
5. Cash flow is the movement of ... into and out of an organization.
6. A firm that offers credit to its customers may find an imbalance in its ... .
7. A second major need for ... financing that is related to a firm's cash-flow problem is ... .
8. The borrowed money is used to buy ... and ... , to pay ... and to cover ... until the goods are sold.
IV. Translate into English.
1. Финансовый менеджмент состоит из тех видов деятельности (activities), которые относятся к получению денег и эффективному их использованию.
2. Краткосрочное финансирование — это деньги, которые будут использоваться в течение одного года или менее (less).
3. Существуют (there are) многие потребности краткосрочного финансирования, но движение наличности и товарные запасы представляют (are) две основные проблемы.
4. Товарные запасы требуют значительного инвестирования для большинства производителей, оптовых торговцев и розничных торговцев.
5. Занятые деньги возвращаются (is repaid) из дохода от продаж.
V.. Answer the questions.
1. Is money needed to start a business?
2. When may temporary financing be needed?
3. What kinds (виды) of financing do you know?
4. What is short-term financing?
5. What is cash flow?
6. What is the ideal cash flow?
7. What can cause a cash flow problem?
8. Does inventory require considerable investment for most manufacturers, wholesalers and retailers?
9. Why do manufacturers often need short-term financing?
10. For what purpose (цель) is the borrowed money often used by the manufacturers?
11. When is the borrowed money usually repaid?
12. What is long-term financing? , .:
13. For what purpose is long-term financing needed?
14. Are the amounts of long-term financing greater than those of short-term financing?
VI. Make up a written abstract of the above text.
VII. Retell the prepared abstract.
Unit 6
Sources of Unsecured Financing
Unsecured financing is financing for which collateral is not required. Most short-term financing is unsecured. Sources of unsecured short-term financing include trade credits, promissory notes, bank loans, commercial papers, and commercial drafts.
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