LEARNING GOALS

634

CURRENT

LIABILITIES

MANAGEMENT

CHAPTER

Across the Disciplines WHY THIS CHAPTER MATTERS TO YOU

Accounting:You need to understand how to analyze supplier
credit terms in order to decide whether the firm should take or
give up cash discounts; you also need to understand the vari-
ous types of short-term loans, both unsecured and secured,
that you will be required to record and report.

Information systems:You need to understand what data the
firm will need in order to process accounts payable, track
accruals, and meet bank loans and other short-term debt obli-
gations in a timely manner.

Management:You need to know the sources of short-term
loans so that if short-term financing is needed, you will under-
stand its costs, both financial and ethical.

Marketing:You need to understand how accounts receivable

and inventory can be used as loan collateral; the procedures

used by the firm to secure short-term loans with such collateral

could affect customer relationships.

Operations:You need to understand the use of accounts

payable as a form of short-term financing and the effect on

one’s suppliers of stretching payables; you also need to

understand the process by which a firm uses inventory as

collateral.

Explain the characteristics of secured short-term

loans and the use of accounts receivable as

short-term-loan collateral.

Describe the various ways in which inventory

can be used as short-term-loan collateral.

LG6

LG5

Review the key components of a firm’s credit

terms and the procedures for analyzing them.

Understand the effects of stretching accounts

payable on their cost, and the use of accruals.

Describe the interest rates and basic types of

unsecured bank sources of short-term loans.

Discuss the basic features of commercial paper

and the key aspects of international short-term

loans.

LG4

LG3

LG2

LG1

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