ABSTRACT
Finance managers in government, as in business, spend a considerable amount of their time dealing with problems related to short-term finance. Short-term finance, also known as working capital, deals with the portion of balance sheet accounts that arises from routine operations of a government. Although there is no acceptable definition of short-term finance, convention suggests that decisions involving short-term finance usually have a life span of a year or less. For instance, when a government decides to sell a bond issue to finance the construction of a capital project, it is considered a long-term decision, while a decision to invest the proceeds from the bond issue until they are required for construction is a short-term decision.
The point to note here is that normal operations of a government create and liquidate working capital on a regular basis and that time plays an important role in that process.
