Purchasing and Financing 2024

Inspection of the accounts
This primarily concerns the balance sheet and the income statement, for at least the
previous three years. In many cases a financial plan will be called for, to give information
about the prospects for investment and income. Customers not required to keep accounts
will present tax statements, statements of turnover or income receipts.
7. LOAN REPAYMENT
In general, we can differentiate between the following types of loan.
o Fixed rate loans require repayment in a lump-sum with interim interest payments.
o Instalment credit loans require repayment in fixed instalments with reduced
interest.
o Annual fixed sum repayment loans require repayment of a fixed annual sum at
increased redemption, but reduced interest.
It is of cause possible to get a combination of these loan types.
Student can calculate the repayment on a loan.
In the examples and tasks below “Instalment” refers to the amount payable on the
outstanding capital amount.
EXAMPLE 1:
The debt is R10 000, the interest rate is 10 % and the instalment is R2 500. – Then
Year Remaining debt Interest Instalment Total annual
re-payment
1 R10 000 R1 000 R2 500 R3 500
2 R 7 500 R 750 R2 500 R3 250
3 R 5 000 R 500 R2 500 R3 000
4 R 2 500 R 250 R2 500 R2 750
Totals R2 500 R10 000 R12 500
The following should be clear from example 1:
o This is an Instalment Credit Loan
o The sum of the instalments is equal to the original debt
o Borrowing money is costly (R2 500 in interest in this case)
EXAMPLE 2:
The debt is R10 000, the interest rate is 10% and the annual re-payment is R3 000. – Then
Year Remaining debt Interest Instalment Total repayment
1 R10 000 R1 000 R2 000 R3 000
2 R 8 000 R 800 R2 200 R3 000
3 R 5 800 R 580 R2 420 R3 000
4 R 3 380 R 338 R2 662 R3 000
5 R 718 R 72 R 718 R 790
Totals R2 790 R10 000 R12 790
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