What is the purpose served by short-term finance ?

Solution

Short-term finance is required for a short-period upto one year. It refers to funds needed to meet day-to-day requirements and for holding stocks of raw materials, spare parts, etc. to be used for current operations. Short-term finance is often called working capital or short-term capital, or circulating capital. As soon as goods are sold and funds are recovered the amount is again used for current operations. Generally speaking, production processes are completed within a year and goods are ready for sale hence short-term funds can be used over and over again from year to year.
How much short-term finance will be required depends on
1. the nature of business undertaken
2. the time gap between commencement of production or purchase of goods and their sale and,
3. the volume of business.

Some More Questions From Sources of Business Finance Chapter

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Sources Of Business Finance

What is the purpose served by short-term finance ?

Some More Questions From Sources of Business Finance Chapter

Give meaning of fixed capital.

Give meaning of working capital.

Give types of working capital.

Give meaning of owner’s capital.

Give meaning of borrowed capital.

Give meaning of long-term finance.

Give meaning of medium-term finance.

Give meaning of short-term finance.

Define shares.

Give the types of shares.

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