Question 3

Before 2008 the trend towards short term financing was fuelled by a global surplus of cheap bank finance, however the financial crisis put an end to this. 

Required:

c) Outline the advantages and disadvantages of a company following an aggressive and a conservative financing policy. And discuss how each of these policies might impact on its value.

b) Describe two sources of short term finance (one bank source and one other) and evaluate the advantages and disadvantages of each source.

c) Discuss two ways that banks can try to protect themselves from the risk of non-payment of interest or capital.