Control of Current Liabilities – Payables, Loans, Overdrafts
- Current liabilities: financial commitments that must be paid by a business in the short-term.
- Minimising the costs related to a firm’s current liabilities is an important part of management.
- Accounts payable: current liabilities (what you owe); control involves the periodic reviews of suppliers and the credit facilities they provide.
- Loans – Short term loans and bridging finance are important sources of short term funding for business.
- Management of loans is important, with particular attention to costs of establishment, interest rates and ongoing charges.
- Overdrafts – Bank overdrafts are a convenient and relatively cheap form of short term borrowing. They enable a business to overcome temporary cash shortages. Banks may charge account keeping fees, establishment fees and interest.
Extract from Business Studies Stage 6 Syllabus. © 2010 Board of Studies NSW.