2016年ACCA知识点：Short-Term Finance

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ACCA F9考试：Short-Term Finance
1.Bank Overdraft
Advantages
Flexible.
Provides instant finance.
Disadvantages
Repayable on call, unless the bank offers a "revolving line of credit".
The interest rate charged is often both high and variable.*
2.Trade Credit
Trade credit involves either delaying/slowing payments to existing creditors or using more of the credit offered by suppliers.
Advantages
Generally cheap.
Flexible.
Disadvantages
May lose settlement (quick payment) discounts.
May lose suppliers' goodwill.
3.Bills of Exchange
Bill of exchange—an acknowledgement of a debt to be paid at some time in the future (e.g. by a customer). Such a bill may then be "discounted" (i.e. sold to a third party for a percentage of face value).
Advantages
Improves cash flow.
Flexible.
Disadvantage
Fees.
4.Commercial Paper
Commercial paper—short-term (usually less than 270 days), unsecured debt issued by high-quality companies. The paper can then be traded by investors on the bond markets
Advantages
Large sums can be raised relatively
cheaply.
No security is required.
Disadvantage
Only available to large companies with very good credit ratings.
5.Short-Term Bank Loans
Advantages
Available to most companies, assuming that there is a well-functioning banking system.
Short-term interest rates are usually lower than long-term interest rates, due to lower credit risk on short-term debt.
Disadvantages
Arrangement fees may be high when expressed as an annual effective cost.
Refinancing risk (rollover risk). Every time a short-term loan matures, the borrower faces the risk that it cannot be easily replaced or refinanced, or that interest rates have risen.