From the course: Managerial Finance Foundations
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Obtaining short-term financing
From the course: Managerial Finance Foundations
Obtaining short-term financing
- An important aspect of short-term financial management is obtaining short-term financing. Consider the case of Toys R Us, the toy retailer. Toy retailing is a seasonal business and this seasonality causes Toys R Us to be cash poor in the fall as they build their inventory up for the holiday selling season. They then receive cash from large customer sales in November, December, and January, once that inventory is sold. So what can Toys R Us do to make sure that sufficient cash is always available? Well, one tactic is to simply stretch out the time you take to pay your suppliers. For example, by paying your suppliers in 60 days instead of 30 days, you might possibly be able to delay your payments until you start collecting cash from your customers. Now, in a similar fashion, you can strategically delay payments on other operating payables, such as your advertising agency, your shipping company, or your maintenance…
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