Business studies cash flow forecast essay
Points for buying machine:
Adding more capital to business from owner
Long term liability from bank or creditor
Sell old machine
Mortgage fixed assets
pay in installment(every year/month/quarter)
Avoid unecessary expense
Sell fixed asset
Business may get subsidies and grants from the government helping the business
Adv and disadv buying machine:
Can boost up sales
Can produce more output in lesser time
Be needing less employes and the less employes will be happy as there is less burden. Since it is a fixed asset it can be for resold
Financial flexibility-you can spread the cost of your equipment over a period of time so that the impact on your cash flow is less severe. Tax benefits-as with purchasing,leasing can also offer tax benefits. Business can usually deduct the full cost of least rentals from taxable income. An integrated maintenance contract and replacement equiptment (in the event of total failure often as part of the deal. The possibility of a periodic upgrade or replacement with new equipment as part of the package keeping your office technology up to date.
Fixing the machine cost a lot
Pay the full cost upfront-this may sot cash flow pressures as you can't easily spread the cost to coincide with the money coming into the business. Replace equipment regularly-machine equipment depreciates in value and may be obsolete after a few years,requiring a further investment. The equiptment overall cost may be greater than if you would purchase it outright There can be more administration involved.
When leasing the business doesnt actually own the equipment it remains the property of the suppliers. When using hire purchase,your business will own the equipment at the end of the contract, by which time it may be obsolete.
Long term causes:
The business can produce more number of outputs and the machine may produce faster and more efficient without using much power...
Bibliography: Bushiness link.gov.uk
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