HOW TO BORROW OR PAY YOUR LOANS
It is crucial to remember that whenever you decide to spend money, you have enough cash to cover that expenditure. As you know, in this simulation game you are required to make capital expenditures and operating expenditures decisions. To pay for capital expenditures, you will need to have adequate cash or borrow money. To cover your operating expenditures, you will need to generate adequate income. To determine if you need to borrow money, you will need to examine your cash flow statement. If you cash flow statement suggests that you will need cash to cover your expenditures, you will need to borrow enough money to cover your expenses. The interest rate is 8 percent. However, if you do not plan well and spend more money than you can afford, you will end up getting a short-term emergency loan with an interest rate of 16 percent. That’s why it is strongly recommended that you pay close attention to your cash flow situation.
It is also recommended that if you have cash either you should invest in capital or pay some of your loans in order to decrease or avoid interest charges.
