Marcy wants to expand her catering business. However, she was ...

[luvbio]

Marcy wants to expand her catering business. However, she was raised to avoid debt at all costs and prefers to have cash in hand before buying anything.
 
  She has 15,000 in cash available for expansion, but the total estimated cost of the expansion is 100,000. Explain to Marcy the advantages and disadvantages using a long-term note payable to finance the expansion.
  What will be an ideal response?

Question 2

A(n) ___________________ _ identifies the employer on all payroll forms and reports filed with the IRS.
 Fill in the blank(s) with correct word

[bpool94]

Answer to Question 1

A long-term note payable involves borrowing money for more than one year. Most long-term notes payable require repayment in the form of regular monthly payments. The payments consist of a combination of interest plus principal. At the end of the loan period the balance owed will be reduced to zero.

Using borrowed money to increase profits is called financial leverage. If Marcy can expand her business and earn additional profits, she should earn more than enough to cover her additional interest expenses.

The disadvantages of a long-term note payable involve the cost of carrying the debt, or interest. Marcy will also need cash from the expanded business, not just profits, to cover the interest and principal payments. Borrowing money now may limit Marcy's ability to borrow additional money until this loan is repaid.

Answer to Question 2

Employer Identification Number
EIN

[luvbio]

Thank you

[bpool94]

Happy to help you