Homework wk 4 Assignment Example | Topics and Well Written Essays - 750 words

Homework wk 4 - Assignment Example A short-term loan is a loan given for at most a three-year period. An overdraft is where the bank allows a customer to overdraw money from the bank, which happens within the banks limits. A variable rate of interest is charged on the amount the corporation is overdrawn on daily basis. Short-term borrowing has a self-liquidating nature, where the company gets short-term loans, uses it get more inventory that in turn promote production of more final product to meet demand. Receivables as a result of the sales thereafter, become cash which is used to pay for the seasonal short-term loan and cover related long-term financing costs. These sources of liquidity involve an agreement between a credit offering facility and the company. Therefore, a variable or fixed rate interest is always charged according to the policies and terms and conditions of the lender. With the annual average purchases and the average accounts payable it is possible to get accounts payable turnover ratio which is the number of times the accounts payable are turned over or purchases paid for in a