Shortterm Borrowing

Fun Toys has a short-term financing problem. It cannot meet the forecasted cash outflows in the second quarter using internal sources. How it will finance that shortfall depends on its financial policy. With a very flexible policy, Fun Toys might seek up to $60 million in long-term debt financing.

Ross et al.: Fundamentals I VII. Short-Term Financial I 1S. Short-Term Finance I I © The McGraw-Hill of Corporate Finance, Sixth Planning and Management and Planning Companies, 2002

Edition, Alternate Edition

CHAPTER 19 Short-Term Finance and Planning 659

In addition, note that much of the cash deficit comes from the large capital expenditure. Arguably, this is a candidate for long-term financing. Nonetheless, because we have discussed long-term financing elsewhere, we will concentrate here on two short-term borrowing options: (1) unsecured borrowing and (2) secured borrowing.

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