Instruments of Short- and Medium Term Financing

On Financing and Capital

Seminar Paper , 2015 , 21 Pages , Grade: 1,7

Business economics - Investment and Finance

The present work focuses on instruments of short- and medium term financing. Financing is very important for companies in all countries of the world, but what is financing exactly? Why do companies need corporate finance?

The nature and extent of the procured, abstract capital are shown on the liabilities side of the balance sheet in the items of equity and debt. On the asset side of the balance sheet it can be seen what kind of goods were procured with the funds provided by the capital providers (investment). As an example, if someone wants to start a business for the production of tennis balls, this person has to procure capital to purchase the raw materials for the production of tennis balls and to pay the staff for manufacturing. Hence the necessity to make use of financial instruments arises. A classification of financing instruments can be carried out according to various criteria. With regard to the origin of capital, external and internal financing can be distinguished. Based on the different types of capital, instruments of financing can be assigned either to equity or debt financing. Moreover, methods of funding can be classified by the purpose and the occasion of capital procurement, or by the maturity structure.

When financing is subdivided in external and internal funding on the basis of the origin of the capital, a clear separation between the company on the one hand and the capital donors (including the owners or shareholders) on the other hand is required.

Contents

List of Figures

1 Introduction

2 Basics – Classification of Financing Instruments
2.1 Origen of the Capital
2.2 Legal Status of the Investor and Ownership
2.3 Duration of Provision of the Capital

3 Short- and medium – Term Instruments
3.1 Trade Credits
3.2 Bank Loans as Cash Credits
3.3 Bank loans as credit commitments
3.4 International Bank Loans

4 Summary

List of Literature

Internet – Resource

• College: Heilbronn University
• Grade: 1,7
• Author: Lola Reiter (Author)
• Publication Year: 2015
• Pages: 21
• Catalog Number: V459448
• ISBN (eBook): 9783668904927
• ISBN (Book): 9783668904934
• Language: English
• Tags: instruments, short-, medium, term, financing, capital