Loans short-term

Liabilities Current liabilities Credit-card debt Short-term installment loan Short-term personal loan Other current liabilities 1,250 450 750... 

Land purchases and many of the costs associated with faciUty development can be accompHshed with long-term loans of 15 to 30 years. Equipment such as pumps and tmcks are usually depreciated over a few years and are funded with shorter-term loans. Operating expenses for such items as feed, chemicals, fuel, utilities, salaries, taxes, and insurance may require periodic short-term loans to keep the business solvent. The projected income should be based on a reaUstic estimate of farmgate value of the product and an accurate assessment of anticipated production. Each business plan should project income and expenses projected over the term of all loans in order to demonstrate to the lending agency or venture capitaUst that there is a high probabiUty the investment will be repaid. 

The second most important source of short-term financing is notes payable from commercial banks. Banks normally reqmre a Borrower to maintain a compensating balance. For example, if a company requires a loan of 100,000, it must borrow more than this, say, 120,000 (on which it pays interest), in order to maintain a minimum checldng-accouut balance of 20,000. Commercial banks also provide a wide variety of other services that can be of great help to companies in temporary financial difficulties. 

Sometimes, fixed assets are purchased via short-term loans, which can lead to hquidity problems. For the most part, fixed assets should be financed from long-term or permanent capital such as stocks or bonds. The proven abihty of management to handle working capital efficiently will put a company in a better position to obtain such longterm capital when required, because the confidence of bankers and stockholders will have been obtained. 

Example 10-9 shows why banks like short-term loans that are paid in equal installments. The actual rate the bank is charging is almost double the stated rate. When closing costs (a charge made to cover the cost of administering the loan) are added to the interest charges, the cost to the borrower is often greater than double the stated rate. 

Government loans to allies, etc. GCm.) Government borrowing abroad ( m.) Net decrease (+) or increase (—) in private investment abroad ( m.) Net export (+) or import (-) of gold and silver GCm.) Net decrease (+) or increase (—) in short-term credits ( m.)... 

All non-recurrent items, including new investment, payments on existing loans, net short-term liabilities, and transfers between banks. 

The owners funds, or equity, include the issued capital (i.e. the face value of the company s shares), capital reserves (funds received in ways distinct from operating profits, such as premiums on the sale of shares) and revenue reserves, which are the accumulated annual profits earned. The long-term loans include not only the sums borrowed from hanks and finance houses as well as bonds issued by the company, but also the provisions for future potential (but as yet unknown) costs for example the sums a company involved in asbestos liability litigation would prudently set aside against possible penalties and costs. Current liabilities include all bills received but not yet paid (for goods and services), and any short-term loans, due within a year, such as bank overdrafts. 

Receivables can be short term (typically due in 30 days), such as trade receivables, which represent die right to payment for goods sold or services rendered, or th can be long term, such as pa)rments due over a period of years under loans, leases, licenses, management contracts, etc. See id. at 5-15. 

In the Conseco restructuring, this reference entity had restructured bank debt in August/September 2000 as a result of a short-term liquidity issue, therefore it changed the bank loan s maturity by a few months, how-... 

The notion that money has a time value is basic to the analysis of financial instruments. Money has time value because of the opportunity to invest it at a rate of interest. A loan that makes one interest payment at maturity is accruing simple interest. Short-term instruments are usually such loans. Hence, the lenders receive simple interest when the instrument expires. The formula for deriving terminal, or future, value of an investment with simple interest is shown as (1.1). 

The coupon process represents the cash flow investors receive while they hold the bond. Assume that a bond s term can be divided into very small intervals of length dt and that it is possible to buy very short-term discount bonds, such as Treasury strips, maturing at the end of each such interval and paying an annualized rate r t). This rate is the short, or instantaneous, rate, which in mathematical bond analysis is defined as the rate of interest charged on a loan taken out at time t that matures almost immediately. The short rate is given by formulas (3.10) and (311). 

Interest paid and repayment of short-term loans and overdrafts... 

Inflow Funds Total Equity Total Long-Term Loans Total Short-Term Pnance Total Funds Inflow... 

Short-term budgeting decisions can be taken every week-period. Week production expenses will consider an initial stock of raw material and products. An initial working capital cash is considered beneath which a short-term loan must be requested. The minimum net cash flow allowed is determined by the CFO considering its variability. 

Working capital Working capital refers to the funds available, and is the difference between current assets (debtors, inventory, bank balances and cash) less current liabilities (creditors, short-term loans and the current portion of long-term loans). 

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