Purchasing and Financing 2024
Purchasing- and Financial Management
For 2nd year CATS learners.
Aligned to the outcomes of the German accredited certification: “Industrie Kaufmann/frau”.
Purchasing- and Financial Management
For 2nd year CATS learners.
Aligned to the outcomes of the German accredited certification: “Industrie Kaufmann/frau”.
Real Securities a. Immovable Securities: The Mortgage The mortgage is a conveyance of property by the debtor to the creditor as a security for the debt. It contains the agreement that the property shall be returned on payment of the debt within a certain period. The mortgagee (creditor) has the right to sell the property if the mortgagor (debtor) fails to repay the debt. Once the debt has finally been repaid, the mortgage will be cancelled, and the owner regains all rights over the property. b. Movable Securities 1. Cession A cession is the transfer of intangible assets such as insurance policies, debtors, shares, or similar certificates to a creditor. The documents in question must identify the creditor as being the legal holder. The creditor must take actual possession of the assets concerned. In the case of insolvency of the debtor the creditor has a preferential claim to payment. 2. Factoring Factoring happens when an enterprise sells its “accounts receivable” to a credit institution for a specified period. The said enterprise will then have less administration, a better cash flow and no further contact with its debtors but will lose out on interest receivable and service fees as these will now be due to the credit institution. 3. Pledge A pledge is a tangible asset like jewellery or precious metals as a security for a credit. The director has to actually take possession of the items in question and must execute uninterrupted control over them. The pledge remains with the creditor as long as the debtor owes the money and in the case of insolvency the creditor has a preferential claim over the proceeds of the assets. As all movable assets in a business are necessary to continue with production the pledge is of little commercial importance. 4. Notarial Bond The notarial bond may be seen as an equivalent to the mortgage only in connection with movable goods. It differs though in the degree of security it gives. Other than with a typical mortgage the creditor cannot automatically auction the property and has no direct access to the proceeds in the case of insolvency. It only gives the creditor a preferential claim over other creditors. The bond must be registered with the Deeds Registry and the property in question remains in the hands of the debtor. If machinery is bonded in this way, the debtor can continue production and earn the means to repay the loan. 40
5. Lien A lien is the right to hold somebody’s property until the debt is paid. A garage owner may hold a client’s car if the client does not collect it after repairs. The creditor has the legal right to sell the property to recover the money. But it is important to notice that the lien does not relate to any other debts that the owner of the property may have with the holder of the lien! 6. Bank guarantee Where a credit institution assumes liability for a credit given by a third person, it is known as a bank guarantee. The borrower remains the principal debtor, but the credit institution is liable if the debts remain unpaid. In return for the guarantee the borrower pays the bank a commission. EXAMPLE: You must decide whether you are going to accept a trade credit or use your overdraft facility in the following case: You have to pay a supplier R10 000 that is due after 30 days. Your overdraft interests’ rate is 15% per annum and you are offered a 3% cash discount if you pay within 10 days. Solution Trade Credit: R10 000 due after 30 days If you pay on day 10 you get the 3% discount and pay only R9 700 but have to use your overdraft facility. You will pay the following amount in interest: R9 700 x 15% / 365 x 20 = R79.73 It is thus worth your while to use your Overdraft facility and take the discount because you will save R300 – R79.73 = R220.27 GROUP ASSIGNMENT: Why is it a bad idea to sign surety for a loan for an unemployed friend? Why is it important to pay your monthly instalments as they fall due? 41
- Page 1 and 2: CATS Program Commercial Advancement
- Page 3 and 4: PART A. PURCHASING MANAGEMENT 1. TH
- Page 5 and 6: Quality Regarding quality, you must
- Page 7 and 8: Price Before one can measure the su
- Page 9 and 10: 5. STOCK CLASSIFICATION BASED ON TU
- Page 11 and 12: CLASS ASSIGNMENT: A handcraft shop
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- Page 17 and 18: Deciding which system to choose wil
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- Page 23 and 24: STEP 13: STEP 14: STEP 15: STEP 16:
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- Page 27 and 28: Current assets are assets with amou
- Page 29 and 30: It is important to note that Income
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- Page 35 and 36: 6. CREDITWORTHINESS Students unders
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- Page 51 and 52: XYZ LIMITED GROUP INCOME STATEMENT
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Real Securities<br />
a. Immovable Securities: The Mortgage<br />
The mortgage is a conveyance of property by the debtor to the creditor as a security for<br />
the debt. It contains the agreement that the property shall be returned on payment of the<br />
debt within a certain period.<br />
The mortgagee (creditor) has the right to sell the property if the mortgagor (debtor) fails<br />
to repay the debt. Once the debt has finally been repaid, the mortgage will be cancelled,<br />
<strong>and</strong> the owner regains all rights over the property.<br />
b. Movable Securities<br />
1. Cession<br />
A cession is the transfer of intangible assets such as insurance policies, debtors, shares, or<br />
similar certificates to a creditor. The documents in question must identify the creditor as<br />
being the legal holder. The creditor must take actual possession of the assets concerned.<br />
In the case of insolvency of the debtor the creditor has a preferential claim to payment.<br />
2. Factoring<br />
Factoring happens when an enterprise sells its “accounts receivable” to a credit institution<br />
for a specified period. The said enterprise will then have less administration, a better cash<br />
flow <strong>and</strong> no further contact with its debtors but will lose out on interest receivable <strong>and</strong><br />
service fees as these will now be due to the credit institution.<br />
3. Pledge<br />
A pledge is a tangible asset like jewellery or precious metals as a security for a credit. The<br />
director has to actually take possession of the items in question <strong>and</strong> must execute<br />
uninterrupted control over them. The pledge remains with the creditor as long as the<br />
debtor owes the money <strong>and</strong> in the case of insolvency the creditor has a preferential claim<br />
over the proceeds of the assets. As all movable assets in a business are necessary to<br />
continue with production the pledge is of little commercial importance.<br />
4. Notarial Bond<br />
The notarial bond may be seen as an equivalent to the mortgage only in connection with<br />
movable goods. It differs though in the degree of security it gives. Other than with a<br />
typical mortgage the creditor cannot automatically auction the property <strong>and</strong> has no direct<br />
access to the proceeds in the case of insolvency. It only gives the creditor a preferential<br />
claim over other creditors.<br />
The bond must be registered with the Deeds Registry <strong>and</strong> the property in question<br />
remains in the h<strong>and</strong>s of the debtor. If machinery is bonded in this way, the debtor can<br />
continue production <strong>and</strong> earn the means to repay the loan.<br />
40
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