Short-term obligations Essay Example | Topics and Well Written Essays - 1250 words

Short- border obligations - Essay ExampleIt 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 do but outweigh organizations current assets. As a result, external sources are the yet 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 coin by the organization for goods delivered or run 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 immediate payment 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 too be financed through short term loans. Banks and other financial institutions offer financia l services that an organization can use for financing its current liabilities. in that location 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 descent 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. (Worldacademy, n.d., 1 Pride, Hunges and Kapoor, 2011, 577). Factoring is another suitable approach to financing short term obligations. This is defined as the transfer of rights over debtors to a third party for finances. The arrangement involves a form of sale of debtors accounts to another entity that will then offer mon ey ground on the accounts receivables balances and the risks involved in the accounts. The transaction also offers money for offsetting short term obligations. Other possible methods of financing