Question

7. A business begins with $1,000,000 from its owners. It places $100,000 into a bank account which it wishes to maintain as a cash reserve. It needs to purchase $1,000,000 of equipment and materials. How much does it need to borrow

Answer 1

Answer:

The amount need to borrow a owner is $100,000

Step-by-step explanation:

The total amount a owner having to start a business = $1,000,000.

He wishes to place $ 100,000 into bank account to maintain as cash reserve.

Now the amount he left with to spent in business purposes = $1,000,000 - $100,000 = $ 900,000.

He needs to purchase equipment and material of $1,000,000

But he is left with only $900,000.

So the amount he has to borrow to fulfill his business requirement is

= $1,000,000 - $900,000 = $100,000