Allocating Costs of Finance by Departmental Responsibility
Article Abstract:
Businesses rarely analyze the financial costs in their business just proclaiming that they are unavoidable, but need to be kept to a minimum. However, this is not sufficient. Some questions should be considered. 1) How much of the company's finances are essential in terms of maintaining the proper capital structure? 2) Why do true costs of finance differ from the actual costs incurred? 3) How can 'avoidable' costs be pointed out and controlled? This method is described with examples. Benefits are that it pinpoints costs and measures efficiency in stock and credit control. Some practical difficulties arise in the implementation such as figuring an 'optimum working capital ratio', also including seasonal trends and other variables.
Publication Name: The Accountant's Magazine
Subject: Business
ISSN: 0001-4761
Year: 1984
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Vehicle fleet finance: contract hire
Article Abstract:
One administrative and finance option for motor vehicle fleets is contract hire, defined as a one-to-three year operating lease which includes predicted annual mileage. Contract accounting functions include: rental calculation, vehicle ordering, and vehicle administration. Rental cars valued at 8000 pounds sterling or less are fully tax deductible, although a value added tax is chargeable on contract hire rentals. The major disadvantage to contract hire agreements is their long-term, inflexible structure. The advantages of contract hire include: purchase and service expertise, fixed costs, economies of scale, and easy financing.
Publication Name: The Accountant's Magazine
Subject: Business
ISSN: 0001-4761
Year: 1987
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