Before choosing a source of finance, split the total amount into parts by purpose and by timing. Each part then gets its own short answer to “what is this for and when is it paid”.
This lesson opens finance decisions in an original case. It applies the idea from matching finance to purpose and duration.
What does the split look like?
Make a three-column table with one row for each need. The columns are purpose, timing and duration of the benefit.
- List each cost in the case.
- Note when it must be paid.
- Note how long the benefit lasts.
- Add the amounts and check the total.
Worked example: Dapur Kek Nurul
The case says the bakery needs RM24 000 to open. The owner has RM9 000 in savings and each monthly surplus of RM1 200. Split the RM24 000 using the case facts.
| Need | Amount | When paid | Benefit lasts |
|---|---|---|---|
| Oven and equipment | RM18 000 | Month 1 | Years |
| First stock | RM4 000 | Month 2 | Weeks, then repeated |
| Shop lot deposit | RM2 000 | Month 1 | Length of the lease |
Check the total: 18 000 + 4 000 + 2 000 = RM24 000, which matches the case.
Now read the split. The equipment and deposit are paid in month 1, so RM20 000 is needed at once. The stock is needed each month later and is repeated as the shop trades, so it can be paid for from the first month’s sales.
The mistake of lump-sum thinking
The common slip is to treat RM24 000 as one need. “The owner needs RM24 000, so she should take a loan of RM24 000.”
This ignores the split. Part of the money is for a repeated running cost, which suits short-term sources, and part is for assets that last. Rewrite: “RM20 000 is needed in month 1 for equipment and the deposit, and RM4 000 of stock is needed in month 2, so the two parts may need different sources.”
Check yourself
The owner decides to add a RM3 000 display counter in month 1. Update the split and the total. How much is needed in month 1?
Answer
The counter is equipment, paid in month 1 and lasting years. New total: 24 000 + 3 000 = RM27 000. Month-1 needs: 18 000 + 3 000 + 2 000 = RM23 000, and stock of RM4 000 still falls in month 2.
Check: 23 000 + 4 000 = 27 000.
What to study next
With the needs split, compare the options for each part. Continue with comparing funding options using supplied terms.
The business case answer planner includes a box for splitting the amount. For a teacher to check your splits, see online one-to-one Business tuition.