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Short-term obligations - Essay Example
Finance & Accounting
Pages 5 (1255 words)
This following paper is being carried out to discuss the financing of ‘short-term’ obligation of PepsiCo and MacDonald’s company. The paper will explore how the two companies that fall within the manufacturing industry financed their ‘short-term’ obligations. …
It is evident from the study that businesses apply a variety of ways to finance their short term obligations. The obligations are outstanding payments that are to be made but outweigh organization’s current assets. As a result, external sources are the only available options for offsetting the liabilities. One off the approaches to financing ‘short-term’ obligation is the use of trade creditors. Creditors are entities that are owed money by the organization for goods delivered or services offered to the company. They occur when benefits are received but no consideration is transferred. The effect of trade creditors is that they allow for retention of cash and cash equivalence within the organization. The cash that would have been paid to the creditors can then be used as a source of finance to ‘short-term’ obligation. ‘Short term’ obligations can also be financed through ‘short term’ loans. Banks and other financial institutions offer financial services that an organization can use for financing its current liabilities. There exists a wide variety of ‘short term’ loans. Unsecured loans as well as loans that are offered upon guarantee are examples of available options from the financial institutions. “Revolving line of credit” is another possible option for financing the ‘short term’ obligations. The arrangement in which a bank agrees to offer specified amount of money to an enterprise on a renewable term provides availability of funds as may be needed by an organization. This is because once an arrangement is made for the revolving fund; the company is assured of obtaining it in case of need. ...
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