SUMMATIVE ASSESSMENT BM 3

Administrative procedures can be avoided

Greater choice of sources of finance

Greater flexibility in the use of finance

Tax concessions using internal profits

$10

$4 800

$7 200

$12 000

Purchasing land for the office

Purchasing stationery (pens, paper, pencils) for the office

Purchasing machinery for the factory

Purchasing vehicles for the office

long term loan with a fixed interest rate

long term security giving the holder part ownership of the business

medium term loan with fixed interest rates

short term loan with variable interest rates

$30 000

$110 000

$120 000

$170 000

cost of sales

expenses

machinery and equipment

overheads

cost of licenses and permits

deposit for purchasing a building

interest on bank loans

purchase of furniture

cost of sales

total variable cost

sales

average fixed cost

Debentures

overdraft

retained profit

share capital

there are no interest charges

there is an unexpected rise in interest rates

there is insufficient retained profit

to avoid potential cash flow problems