From the course: Finance Foundations
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Obtaining short-term financing
- Another important aspect of short-term financial management is obtaining short-term financing. You remember the case of Toys R Us with a variable seasonal cash flow pattern? Low cash in October after a big inventory build up? And then a large cash balance in January after the holiday season sales and cash collections? Because of the seasonal up and down fluctuation in cash, sometimes Toys R Us needs to borrow money in the short-term. Well, there are several ways to obtain these short-term loans. One way is just a straightforward short-term bank loan. Go to the bank, ask for a loan and promise the bank that you'll repay the loan in a couple of months. The best way to get this type of short-term loan, is to provide the bank with a carefully constructed short-term cash budget. The cash budget should show the need for the money, but also the existence of subsequent surplus cash, with which to repay the loan. Now another way to obtain short-term financing, is to arrange all of this in…
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