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SOURCES OF SHORT-TERM FINANCING - Coggle Diagram
SOURCES OF SHORT-TERM FINANCING
A MAJOR VARIABLE IN DETERMINING THE PAYMENT PERIOD IS THE POSSIBLE EXISTENCE OF A CASH DISCOUNT
PRIME RATE
RATE BANK CHARGES ITS MOST CREDITWHORTY COSTUMERS
TERM LOAN IS USUALLY REPAID IN MONTHLY OR QUARTELY INSTALLMENTS
THE EFECTIVE INTEREST RATE IS THE STATED INTEREST RATE DIVIDED BY (1-C)
ANNUAL PERCENTAGE RATE (APR) IS REALLY A MEASURE OF THE EFFECTIVE RATE WE HAVE PRESENTED
ACOUNTS PAYABLE IS A SPONTANEOUS SOURCE OF FUNDS
NET TRADE CREDIT
POSITIVE
ACCOUNTS RECEIVABLE ARE GREATER THAN ACCOUNTS PAYABLE AND VICE VERSA
CASH DISCOUNT ALLOWS A REDUCTION IN PRICE IF PAYMENT IS MADE WITHIN A SPECIFIED TIME PERIOD
COMPENSATING BALANCE A BANK MAY REQUIRE THAT BUSSINES CUSTOMERS EITHER PAY A FEE THE SERVICE OR MAINTAIN
INSTALLMENT LOAN
CALL FOR A SERIES OF EQUAL PAYMENTS OVER THE LIFE OF THE LOAN
IN 1969-70,1973-74 AND 1979-81, THE ECONOMY WENT TROUGH PERIODS OF EXTREME CREDIT SHORTAGES IN THE BANKING SECTOR. AND IN FINANCIAL MARKETS
COMERCIAL PAPER REPRESENTS A SHORT TERM, UNSECURED PROMISSORY NOTE ISSUED TO THE PUBLIC IN MINIMUM UNITS OF 25.000
A SECOND ADVANTAGE OF COMMERCIAL PAPER IS THAT NO COMPENSATING BALANCE REQUIRE MENTS ARE ASSOCIATED WITH ITS ISSUANCE
THE LENDING INSTITUTION WILL GENERALLY STIPULATE WICH OF THE ACCOUNTS RECEIVABLE IS OF SUFFICIENT QUALITY TO SERVE AS COLLATERAL FOR A LOAN
TRUST RECEIPT IS AN INSTRUIMENT ACKNOWLEDGING THAT THE BORROWER HOLDS THE INVENTORY AND PROCEEDS FROM SALES IN TRUST FOR THE LENDER