Sources of Business Finance: Internal, External, Risks & Ratios
internal finance – ANSWER funds generated by and within the firm
Five-year term loan - ANSWERA financing option that involves borrowing money
for five years with a total interest charge of $20,000.
Cost of loan - ANSWER The overall cost of using the loan if the vehicle is sold after
five years includes the purchase price plus interest minus the resale value.
Cost of leasing - ANSWER The cost of leasing the vehicle over the five-year period
is calculated by multiplying the weekly lease payment by the number of weeks in
five years.
Lease appropriateness - ANSWER It may be inappropriate to use a lease to obtain
the van if modifications are required that the leasing company does not allow.
Leasing cost calculation - ANSWER The cost of leasing the equipment over the
four-year period is calculated by multiplying the lease payment by the total
number of payments made.
Equipment useful life - ANSWER The expected useful life of the new digital
imaging equipment is four years.
Financing options - ANSWER Three financing options identified for the new digital
imaging equipment are capital contribution, lease arrangement, and a term loan.
, Lease arrangement - ANSWERA lease arrangement of $1,500 a fortnight for four
years is one of the financing options for acquiring new digital imaging equipment.
Unsecured term loan - ANSWERA four-year unsecured term loan with a total
interest cost of $25,000 is one of the financing options for acquiring new digital
imaging equipment.
Total interest charge - ANSWER The total interest charge for the five-year term
loan is $20,000.
Vehicle resale value - ANSWER The expected resale value of the van after five
years is about $25,000.
Van cost - ANSWER The expected cost of the new van for transporting DJ
equipment is $40,000.
Equipment cost - ANSWER The new printing equipment is worth $24,000.
Van modification cost - ANSWER The cost of the van, including necessary
modifications, is expected to be $30,000.
Digital imaging equipment cost - ANSWER The quote for the new digital imaging
equipment is $120,000.
Debt Ratio of Holding Architecture - ANSWER Calculated as Total Liabilities
divided by Total Assets, which is $190,000 / $250,000.
internal finance – ANSWER funds generated by and within the firm
Five-year term loan - ANSWERA financing option that involves borrowing money
for five years with a total interest charge of $20,000.
Cost of loan - ANSWER The overall cost of using the loan if the vehicle is sold after
five years includes the purchase price plus interest minus the resale value.
Cost of leasing - ANSWER The cost of leasing the vehicle over the five-year period
is calculated by multiplying the weekly lease payment by the number of weeks in
five years.
Lease appropriateness - ANSWER It may be inappropriate to use a lease to obtain
the van if modifications are required that the leasing company does not allow.
Leasing cost calculation - ANSWER The cost of leasing the equipment over the
four-year period is calculated by multiplying the lease payment by the total
number of payments made.
Equipment useful life - ANSWER The expected useful life of the new digital
imaging equipment is four years.
Financing options - ANSWER Three financing options identified for the new digital
imaging equipment are capital contribution, lease arrangement, and a term loan.
, Lease arrangement - ANSWERA lease arrangement of $1,500 a fortnight for four
years is one of the financing options for acquiring new digital imaging equipment.
Unsecured term loan - ANSWERA four-year unsecured term loan with a total
interest cost of $25,000 is one of the financing options for acquiring new digital
imaging equipment.
Total interest charge - ANSWER The total interest charge for the five-year term
loan is $20,000.
Vehicle resale value - ANSWER The expected resale value of the van after five
years is about $25,000.
Van cost - ANSWER The expected cost of the new van for transporting DJ
equipment is $40,000.
Equipment cost - ANSWER The new printing equipment is worth $24,000.
Van modification cost - ANSWER The cost of the van, including necessary
modifications, is expected to be $30,000.
Digital imaging equipment cost - ANSWER The quote for the new digital imaging
equipment is $120,000.
Debt Ratio of Holding Architecture - ANSWER Calculated as Total Liabilities
divided by Total Assets, which is $190,000 / $250,000.
