Rashid LLC is a family-owned company that deals with the sale of building materials. Rashid LLC...
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Rashid LLC is a family-owned company that deals with the sale of building materials. Rashid LLC has built up a reputation for quality, and revenue has increased over recent years to OMR 100,000 per year. However, due to COVID 19, his business has been impacted and he is struggling to manage the fixed expenses and is in dire need of working capital of OMR 25,000 for 6 months. As of 1 June 2020, his customers owe him OMR 10,000 which is expected to be received in the next 3 months. The balance as shown by his bank statement is OMR 2,000. He is looking for various financing options available for his working capital needs for which he has approached Safebank LLC. The bank has given him various finance option based on credit scores like • Overdraft @ 8 % p.a. interest • Term loan - for 2 years @ 6 p.a. (2% penalty of the remaining amount if loan amount settled before the end of the loan tenure) • Cash credit - @ 9% p.a. 2. Calculate the interest payable by Rashid under each of three options i.e Overdrafts, Cash credit, and Term Loans assuming that he is taking a loan of OMR 25,000 on 1* june 2020 for 6 months and he immediately uses all the loan amount for making payments for his various expenses, and on 5th September he deposited OMR 10,000 into the bank that he received from his customers. Based on these calculations, recommend the most suitable finance options. ( 50 words minimum/4 Mark) Rashid LLC is a family-owned company that deals with the sale of building materials. Rashid LLC has built up a reputation for quality, and revenue has increased over recent years to OMR 100,000 per year. However, due to COVID 19, his business has been impacted and he is struggling to manage the fixed expenses and is in dire need of working capital of OMR 25,000 for 6 months. As of 1 June 2020, his customers owe him OMR 10,000 which is expected to be received in the next 3 months. The balance as shown by his bank statement is OMR 2,000. He is looking for various financing options available for his working capital needs for which he has approached Safebank LLC. The bank has given him various finance option based on credit scores like • Overdraft @ 8 % p.a. interest • Term loan - for 2 years @ 6 p.a. (2% penalty of the remaining amount if loan amount settled before the end of the loan tenure) • Cash credit - @ 9% p.a. 2. Calculate the interest payable by Rashid under each of three options i.e Overdrafts, Cash credit, and Term Loans assuming that he is taking a loan of OMR 25,000 on 1* june 2020 for 6 months and he immediately uses all the loan amount for making payments for his various expenses, and on 5th September he deposited OMR 10,000 into the bank that he received from his customers. Based on these calculations, recommend the most suitable finance options. ( 50 words minimum/4 Mark)
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Related Book For
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
Posted Date:
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