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

Short-term liabilitys - Essay poserIt is evident from the study that businesses apply a variety of ways to finance their short term obligations. The obligations argon outstanding payments that are to be made but outweigh organizations current assets. As a result, external sources are the only available options for offsetting the liabilities. One off the approaches to financial backing short-term obligation is the use of trade confidenceors. Creditors are entities that are owed money by the organization for goods delivered or services offered to the company. They sink when benefits are received but no consideration is transferred. The effect of trade creditors is that they allow for retention of coin and cash equivalence within the organization. The cash that would have been paid to the creditors digest then be utilise 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 of fer financial services that an organization can use for support its current liabilities. There exists a wide variety of short term loans. unbolted 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 order of battle in which a money box agrees to offer specified amount of money to an enterprise on a renewable term provides approachability of broths 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 th en offer money based 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