What is the purpose served by short term finance?

Short term finance refers to the funds arranged for a period of one year or even less. It is also known as working capital which is excess of current assets over current liabilities.

Purpose of Short Term Finance:

1. It can be of tremendous help in order to cover the firm's short term operational costs (like hiring extra staff in case of big orders) .

2. It helps in meeting day-to-day requirements such as holding stock of raw material, etc.

3. It bridges the gap between account receivables and payables and facilitates securing of additional funds which can be used in times of necessity.

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1). type of fund is required to meet day -to-day requirement such as holding stock of raw material, spare parts etc.

2). trading companies require more of short term finance as compared to manufacturing companies

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