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Business Financial Resources

Business finance resources can be studied under the following headings:

(1) Short Term Finance:

Short term financing is needed to meet today’s business needs. Current needs may include payment of taxes, salaries or wages, repair costs, payments to creditors, etc. Short-term financial needs arise because sales revenue and purchase payments are not always the same all the time. Sometimes sales can be low compared to purchases. Further sales can be made on credit while purchases are made in cash. So short-term finance is needed to offset this imbalance.

Short-term sources of finance are as follows:

(i) Bank Overdraft: Bank overdraft is widely used as a source of business financing. Under this the client can withdraw any amount over and above his original account balance. This makes it easier for entrepreneurs to meet short-term unexpected expenses.

(ii) Billing Discounts: Exchange invoices can be discounted at the bank. This gives the bill … Read more