Functions of a Financial Manager 2

relationship

While suppliers' credit is generally free of interest charges, the obligations with them have to be paid on time to maintain good supplier _____. Such ______ should be nurtured to ensure timely delivery of inventories.

lower

For short-term bank loans, the interest rate is generally lower as compared to that of long-term loans. Hence, this would lead to a ____ financing cost

long term sources

However, since ____ sources have a longer time to mature, it gives the company more time to accumulate cash to pay off the obligation in the future.

higher

Since long term sources will be paid much later, the lenders expect more risk and place a _____ interest rate which makes the cost of long term sources ____ than short term sources.

Operating decisions

The company has a choice on whether to finance working capital needs by long term or short term sources.

capital

The role of the VP for finance is determining how to finance working _____ accounts such as accounts receivable and inventories.

Short Term

____ sources are those that will be payable in at most 12 months. This includes short-term loans with banks and suppliers' credit. .

Short term sources

______ sources pose a trade-off between profitability and liquidity risk. Because this source matures in a short period, there is a possibility that the company may not be able to obtain enough cash to pay their obligation (i.e. liquidity risk).

Long term sources

______ sources, on the other hand, mature in longer periods.

Suppliers' credit

are the amounts owed to suppliers for the inventories they delivered or services they provided.

Operating decisions

deal with the daily operations of the company.

risk and return

the choice between short and long term sources depends on the ____ and ____ trade off that management is willing to take.