Interest Free Sources and Unsecured Interest Bearing Sources A firm obtains its funds from a variety of sources. Some capital is provided by suppliers, creditors, and owners, while other funds arise from earnings retained in business. In this segment, let me explain to you the sources of short-term funds supplied by creditors. Characteristics of short-term financing: Cost of Funds: Some forms of short-term financing may prove to be expensive than that of intermediate and long-term financing while some short-term sources like Accruals and Payables provide funds at no cost to the firm. Rollover Effect: Short-term finance as the name indicates must be repaid within a period of one year – though some sources provide funds that are constantly rolled over. The funds provided by payables, may remain relatively constant because, as some accounts are paid, other accounts are created. Clean-up: This happens when commercial banks or other lenders demand the firm to pay-off its short term obligation at one point in a financial year. Goals of Short-Term Financing: Funds are needed to finance inventories during a production period. Short term funds facilitate flexibility wherein, it meets the fluctuating needs for funds over a given cycle, commonly 1 year. To achieve low-cost financing due to interest free loans. Cash flow from operations may not be sufficient to keep up with growth-related financing needs Interest Free Sources: Accounts Payable Accounts payable are created when the firm purchases raw material, supplies, or goods for resale on credit terms without signing a formal note for the liability. These purchases on “open account” are, for most firms, the single largest source of short-term financing. Payables represent an unsecured form of financing since no specific assets are pledged as collateral for the liability. Even though no formal note is signed, an accounts payable is a legally binding obligation of a firm. Postponing payment beyond the end of the net (credit) period is known as “stretching accounts payable” or “leaning on the trade.” Possible costs of “stretching accounts payable” are Cost of the cash discount (if any) forgone Late payment penalties or interest Deterioration in credit rating  Accruals: These are short term liabilities that arise when services are received but payment has not yet been made. The two primary accruals are wages payable and taxes payable. Employees work for a week, 2 weeks or a month before receiving a paycheck. The salaries or wages, plus the taxes paid by the firm on those wages, offer a form of unsecured short-term financing for the firm. The Government provides strict rules and procedures for the payment of withholding and social security taxes, so that the accrual of taxes cannot be readily manipulated. It is however, possible to change the frequency of paydays to increase or decrease the amount of financing through wages accrual.   Wages — Benefits accrue via no direct cash costs, but costs can develop by reduced employee morale and efficiency.   Taxes — Benefits accrue until the due date, but costs of penalties and interest beyond the due date reduce the benefits. Unsecured Interest Bearing Sources: Self-Liquidating Bank Loans The bank provides funds for a seasonal or cyclic business peak and the money is used to finance an activity that will generate cash to pay off the loan. Borrowed Funds → Finance Inventory → Peak Sales Season → Receivables → Cash → Pay Off the Loan. Three types of unsecured short-term bank loans: Single payment note – A short-term, one-time loan made to a borrower who needs funds for a specific purpose for a short period of time. Line of Credit – An informal arrangement between a bank and its customer specifying the maximum amount of...

Market Research for Product Line Management Business firms, whether involved in the manufacture of goods or delivery of services, have to understand the importance of marketing research that would give a fair idea about their territory of operations and the scope for development. Let me first clarify the obvious difference between a market research and marketing research. While market research is confined to only a market which comprises of its potential and actual buyers, a marketing research delves deep into and further beyond, covering all areas of marketing including the market. Identification of Consumer Needs: Identification of consumer needs and satisfying them is vital for the emergence of a buyers market. Although firms manufacture goods that are competitive in terms of quality and price, it is the middlemen, the linking factor between the manufacturer and the wholesaler or retailer, that have a commanding grip on distribution, affecting sales volumes. Extensive marketing research will help firms to solve such problems of middlemen and distribution, to cater to the needs of the ever expanding market. Preference of People: People’s preference always changes resulting in a sea change of market conditions. In order to anticipate and meet any such changes, a firm needs to analyze the market conditions on a day to day basis. Also improving the product design helps a firm to retain its customer base. How does a firm survive in the market without knowing the elemental changes that are happening in its immediate environment? Pricing is one of the crucial factors that determine the acceptance ratio of a product or range of products. Information Source: Marketingtutor A separate department is maintained by some top corporate firms to collect relevant information about the pricing strategies of rival companies that helps them to take the market lead, by quoting competitive prices comparatively. Such secret agendas are a need of the hour to outsmart your rivals. Sales Promotion and Advertisement Campaigns: Another component of the research planning is sales promotion and advertisement campaigns. Sales promotion is solely dependent upon the sales force and the marketing manager has to play a key role in integrating their functions to bring out their strengths. The activities of the sales personnel should be oriented towards targets and a mission without a target is like travelling without knowing the destination. Information Source: BBAMANTRA When we talk about advertisements, they not only sell tangible products but also intangible things like morals, values, love etc., So, it becomes even more important for the advertisers to follow some built in standards that does not affect the ethical values of the society concerned and also they should make it a point not to make women a mere object of attraction. The market research that is a part of marketing research includes the study of the following: Market sizeMarket potentialMarket shareMarket segmentsMarket trends and seasonal trendsSales forecastingConsumer profileConsumer preferenceCompetitor analysisMeasuring the price elasticity of demand and much more. Such marketing research helps a firm to develop a comprehensive plan regarding effective training programmes, sales force management, research and development programmers and effective control mechanisms. It also facilitates efficient decision making and the operational tasks of marketing management, thereby contributing to customer satisfaction and efficiency of the...