FUND.OF CORP.FINANCE PKG. F/BU >C<
FUND.OF CORP.FINANCE PKG. F/BU >C<
16th Edition
ISBN: 9781323165997
Author: Berk
Publisher: PEARSON C
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Chapter 20, Problem 4CT
Summary Introduction

Permanent shortfalls: The shortfall of cash which affects the firm’s long-term financial decisions is called permanent short-falls. The permanent shortfall results in the long-term financial requirement for the firm which should be met through long-term financing.

Temporary shortfall: The shortfall of cash which affects the firm’s short-term financial decision is called temporary shortfalls. The temporary shortfall results in the short-term requirement of fund for the firm which should be meet through short-term financing.

To determine:

The importance of distinguishing the permanent and temporary shortfalls.

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