Final answer:
Short-term financing options available as needed include a line of credit, trade credit, factoring, and commercial paper, which are all tools that a firm can use depending on its financial situation and goals.
Step-by-step explanation:
Examples of short-term financing that are available to firms only as needed include:
- Line of credit: This is a pre-arranged amount of money that a bank agrees to lend to a company whenever it is needed, up to a set limit.
- Trade credit: This type of financing occurs when a supplier allows a company to pay for goods or services at a later date, essentially extending a loan to the company.
- Factoring: This involves a firm selling its accounts receivable at a discount to a third party (called a factor) in exchange for immediate cash.
- Commercial paper: This is a form of unsecured, short-term debt issued by corporations, typically used for the financing of accounts payable, inventories, and meeting short-term liabilities.
A firm must consider various factors, such as the cost of capital and the desired financial leverage, when selecting from these financing options.