Short-Term Funding. An Effective Device to Aid Business Profitability

Term Paper , 2013 , 15 Pages , Grade: A

Business economics - Investment and Finance

The purpose of this write up is the discussion of how short-term funding can be used to aid business profitability. In order to achieve this objective, various sources of short term funding will be evaluated with a view to underscore the relative advantages and disadvantages. I will also recommend factors to consider before using short term funding.

The key purpose of any business venture is return. This can come in various forms such as profit maximization; maximization of contribution, shareholders wealth maximisation among others. These strategic objectives usually come in sizes depending on the nature of the business or organisation.

Lofty as strategic decisions may be, the importance of having adequate and efficient funding to support it cannot be over-emphasised. It has been shown again and again that one of the main reasons why business fails is the miss-matched of funding. Experience has shown that when you use your working capital (a form of short-term fund) to finance a capital project, the ability to run the business as a going –concern into a foreseeable future becomes shaky due to cash-flow problems.

Funding a business that requires a short-term funding with a long-term financing is a sure way to exist the market arena in an unceremoniously. It is therefore critical to have a right mix of fiancé to boost productivity and enhance competitive advantage.

Inhaltsverzeichnis (Table of Contents)

• INTRODUCTION
• DEFINITION OF KEY TERMS
• TYPE OF SHORT TERM FUNDING
  • OWNER'S CAPITAL
  • Esusu
  • Business Overdraft
  • Loans From Family, Friends and associates
  • Trade Creditor
  • Debt Factoring And Invoice Discounting
• GUIDE TO USING SHORTERM FUNDING
  • Make a clear vision and mission statement
  • Evaluate the options
  • Payback Period of the Investment
  • Processing duration
  • Inflation
  • Interest Rate
• CONCLUSIONS

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This document explores the utilization of short-term funding to enhance business profitability. It aims to analyze various sources of short-term financing, examining their advantages and disadvantages. Additionally, it provides a guide to key factors to consider before employing short-term funding.

• The importance of short-term funding for business profitability
• Different sources of short-term funding
• Advantages and disadvantages of various short-term financing options
• Factors to consider before using short-term funding
• The role of financial planning and strategy in maximizing the benefits of short-term funding

Zusammenfassung der Kapitel (Chapter Summaries)

The introduction highlights the crucial role of funding in achieving business objectives, emphasizing the importance of aligning funding strategies with business needs. It also introduces the concept of short-term funding and its significance in business profitability.

The section on "Definition of Key Terms" provides clear explanations for essential financial concepts like short-term and long-term financing, profit, cash, financing, risk, return, and capital. This sets the foundation for understanding the subsequent discussions on short-term funding.

The chapter on "Type of Short Term Funding" delves into various sources of short-term financing, starting with "Owner's Capital," the initial source of funding for most entrepreneurs. The chapter also examines other options such as "Esusu," "Business Overdraft," "Loans from Family, Friends and associates," "Trade Creditor," and "Debt Factoring and Invoice Discounting," providing insights into their characteristics and potential uses.

Schlüsselwörter (Keywords)

The main keywords and focus topics of this work include short-term funding, business profitability, financing options, financial planning, risk management, return on investment, and capital management. The document explores the use of short-term funding sources such as owner's capital, trade credit, and bank loans to achieve business goals and maximize profits.

• College: ( Atlantic International University ) (Business and Economics)
• Course: Accounting and finance
• Grade: A
• Author: Michael Oluwadare Idowu (Author)
• Publication Year: 2013
• Pages: 15
• Catalog Number: V301384
• ISBN (eBook): 9783656973737
• ISBN (Book): 9783656973744
• Language: English
• Tags: short-term, funding, effective, device, business, profitability