2. How much should the firm borrow in the short term? There is no universally accepted definition of short-term finance. The most important difference between short-term and long-term finance is in the timing of cash flows. Short-term financial decisions typically involve cash inflows and outflows that occur within a year or less. For example, shortterm financial decisions are involved when a firm orders raw materials, pays in cash and anticipates selling finished goods in one year for cash. In contrast, long-term financial decisions are involved when a firm purchases a special machine that will reduce operating costs over, say, the next five years.