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An Australian theme park wants to implement a new point-of-sale system that allows improved tracking of stock levels - HSC - SSCE Business Studies - Question 12 - 2023 - Paper 1
Question 12
An Australian theme park wants to implement a new point-of-sale system that allows improved tracking of stock levels. The system will cost $185,000 to establish. Wh... show full transcript
Worked Solution & Example Answer:An Australian theme park wants to implement a new point-of-sale system that allows improved tracking of stock levels - HSC - SSCE Business Studies - Question 12 - 2023 - Paper 1
Step 1
Which long-term source of finance would be most appropriate for this system?
Answer
In evaluating the appropriateness of financing options for the new point-of-sale system costing $185,000, we consider the characteristics of each option:
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A. Derivatives: These are financial instruments used for hedging or speculation. They do not provide direct financing for capital expenditures like a point-of-sale system.
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B. Hedging: This is a risk management strategy rather than a financing source. It protects against price movements but does not directly finance an investment.
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C. Leasing: This option allows the theme park to use the point-of-sale system without the full upfront cost. It is a viable long-term financing solution, as it spreads the cost over time and keeps cash flow flexible.
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D. Overdraft: An overdraft is a short-term borrowing facility and is not suitable for long-term investments.
Given these factors, the most appropriate long-term source of finance for implementing the new point-of-sale system is C. Leasing.