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Money Bag

Unit 3 - Finance & accounts

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Chart Increasing

Unit 1 - Introduction To Business Management

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Briefcase

Unit 2 - Human Resource Management

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Direct Hit

Unit 4 - Marketing

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Factory

Unit 5 - Operations management

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Bar-Chart

Unit 6 - Assessment

😀 FUN FACT! Imagine buying a candy bar with a 30-year mortgage loan. Sounds crazy, right? Well, that&#39;s like using long-term finance for short-term needs. Let&#39;s break it down...

<ul>
	<li>Simple Idea
	<ul>
		<li>Use short-term finance 💸 for short-term assets.</li>
		<li>Use long-term finance 🏦 for long-term assets.</li>
	</ul>
	</li>
</ul>

Example: Don&#39;t use a 30-year loan to pay off a lunch debt; and don&rsquo;t pay for a house with the money from your daily allowance!

There&rsquo;s no one-size-fits-all answer, but here&#39;s the general consensus:

Short-Term Finance

<ul>
	<li>
	Purpose: Helps in the day-to-day hustle 🏃&zwj;♂️.
	</li>
	<li>
	Provides: Working capital (like the cash in your wallet for everyday needs).
	</li>
	<li>
	Payback Time: Usually within a year or less (like returning a borrowed pencil before summer break!).

	Real World Examples

	<ul>
		<li>Bank Overdrafts: When you overspend a bit and the bank has your back (think of it as asking a friend for a small favor).</li>
		<li>Short-Term Loans: A quick loan, like asking for some money to buy snacks, promising to pay back tomorrow.</li>
		<li>Trade Credit: It&#39;s like telling the cafeteria, &ldquo;I&rsquo;ll pay for this sandwich next week!&rdquo;</li>
	</ul>
	</li>
</ul>

Long-Term Finance

<ul>
	<li>
	Purpose: Big purchases 🏠 or making your business grow 🌳.
	</li>
	<li>
	Used for: Buying long-term assets and expanding the business.
	</li>
	<li>
	Payback Time: More than a year. This is the long game!

	Real World Examples

	<ul>
		<li>Long-Term Bank Loans: Borrowing money to maybe start a business or buy a car. Like getting a big favor, but promising to repay over time.</li>
		<li>Share Capital: Selling parts of your business (shares) to get money. It&#39;s like letting your friends own a part of your lemonade stand for some cash now!</li>
	</ul>
	</li>
</ul>

<ul>
	<li>🎯 Aim to Match: Always try to match the asset&#39;s lifespan with the right finance type. Just like you wouldn&rsquo;t wear summer shorts in winter!</li>
	<li>📖 Definitions Vary: Some people might have different ideas on what &ldquo;short-term&rdquo; and &ldquo;long-term&rdquo; exactly mean. Always clarify! 
	&nbsp;</li>
</ul>

💡 Quick Tip: When deciding on the type of finance, think about what you&rsquo;re buying and how long you&rsquo;ll need to pay it off. Just like you wouldn&#39;t take a year to pay off a candy bar, or a day to pay off a house! 🍫🏡

&nbsp;

Happy studying and remember to keep it fun! 📚🎉

Mastering Short-Term Vs. Long-Term Finance: Key Differences

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Standard Level

Business Management SL

Unit 3 - Finance & accounts

Mastering Short-Term Vs. Long-Term Finance: Key Differences

Table of content

What's the deal with short - & long -term finance?

Unlock the Full Content!

Unit 3 - Finance & accounts

Mastering Short-Term Vs. Long-Term Finance: Key Differences

Table of content

What's the deal with short - & long -term finance?

Unlock the Full Content!