Most firms use several types of short-term debt to finance their working capital requirements.
Included are bank loans, trade credit, commercial paper and accruals. Interest rates can increase dramatically and changes in a company's financial position can affect both the cost and availability of short-term credit. In this question set, we examine the borrowing arrangements for the finance of current and other assets of two large companies and the costs of those arrangements. We also use part of the historical treasury yield curve to see the effect of changing interest rates on the cost of short-term borrowing. The text discusses revolving credit agreements.