Short-term finance and inventories

Short-term finance is an analysis of decisions that affect current assets and current liabilities. The two aspects of short-term financial planning are the size of the firm’s investment in current assets, such as cash, accounts receivable, and inventory and how to finance these short-term assets. This paper examines the short-term finance of Hungarian firms: what determines the decisions about investments in current assets especially in inventories, how financial managers find ways of financing current assets and how the government tries to regulate inventory investments through monetary and fiscal policies. The relationships among current assets, current liabilities and regulation can be analysed best through the study of recent economic changes. In the course of the past 18 months more and more restrictive measures were introduced in order to reduce domestic demand but real economic processes do not seem to react ‘properly’ to the tightening monetary policy.