Financial Information and Decisions Solutions Paper 1

Business Finance: Needs and Sources Solutions ✍🏽

Dika is a sole trader in Country A. He provides removals services to business customers. His business does not benefit from any economies of scale because it is small. Dika uses an old truck he has borrowed from his father to travel between his customers’ offices and shops. As the truck often breaks down, Dika is thinking of buying a new truck. The government of country A has recently increased interest rates.

(c) Outline two factors Dika should consider when choosing a source of finance for the new truck. [4]

Factor 1:             Size of his business

may be viewed as a higher risk for loans as he is a sole trader.

Factor 2:             Cost of repayments

As interest rates have recently increased.

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