12. Short-term financing Why use short-term financing? Cash flows from operations may not be sufficient for a firm to keep up with growth-related financing needs, or the firm may not be able to always generate enough cash flow to maintain a surplus of cash. Firmis prefer to borrow now to fulfill their capital requirements through means of short-term financing or long-term financing. Both methods have their advantages and disadvantages. The following statement identifies a possible characteristic of short-term financing. Consider this case: Short-term credit agreements are more restrictive than long-term credit agreements. Identify whether the preceding statement is true or false This statement is true. O This statement is false. Firms use a variety of short-term financing sources to support working capital. Use the descriptions in the following table to identify the short-term financing source. Description Short-Term Financing Source A formal, committed line of credit extended by a bank or other lending institution Unsecured, short-term promissory notes issued by large firms in denominations of $100,000 or more