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A) Cash Credit B) Short Term Loans From C) Financial Institutions D) Letter of Credit

The document discusses the different financing needs of organizations based on their operations. It states that industries like steel require more long-term financing for plant and machinery, while hosiery production needs more short-term financing for daily expenses. The arrangement of short-term funds for inventory, raw materials, and other operating costs is highly important.

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Sikander Girgoukar
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15 views2 pages

A) Cash Credit B) Short Term Loans From C) Financial Institutions D) Letter of Credit

The document discusses the different financing needs of organizations based on their operations. It states that industries like steel require more long-term financing for plant and machinery, while hosiery production needs more short-term financing for daily expenses. The arrangement of short-term funds for inventory, raw materials, and other operating costs is highly important.

Uploaded by

Sikander Girgoukar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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All organizations need different types of finance i.e.

long-term and short-term, but the combination in which these are used differ from one organization to another. For example, steel industry requires more long-term finance to be invested in plant and machinery than in the manufacture of leather goods or plastic buckets. On the other hand, for manufacturing hosiery items, use of short-term finance would be more than that of long-term finance. therefore, arrangement for funds to meet day-to-day expenses like inventory, raw material supplies and miscellaneous expenses has great significance.

Types of finances 1 Long term finance 2 Short term finance

Sr.No. 1

points Need

Long term Long term funds are needed for meeting fixed capital requirement

short term Short term funds are needed for meeting working capital requirement.

Period

duration of this source is more than one year.

Short-term Loan Duration of this source is Less Than 1 Year i.e. 3 months, 6 months, 9 months, etc

Sources

Long term finance can be raised from a)initial public offer b)secondary public offer c)right issues d)obtaining term loan

short term finance can be raised from a) Cash credit b) Short term loans from c)financial institutions d)Letter of credit

duration of opreting cycle

Need for long-term finance does not vary with the length of operating cycle

Need for long-term finance does not vary with the length of operating cycle

difficult to obtain as compare to short term

Easier to obtain than Longterm Loan as for long term loans many requirements like financial statements and guarantees need to be be fulfilled

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