Manage Physical Assets (Finance)

This article discusses the management of physical assets in finance, including asset registers, maintenance programs, and acquisition decisions. It also covers operational requirements, design features, and lease agreements.

Running head: MANAGE PHYSICAL ASSETS (FINANCE)
Manage Physical Assets (Finance)
Name of the Student:
Name of the University:
Authors Note:

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MANAGE PHYSICAL ASSETS (FINANCE)
Contents
Section 1:.........................................................................................................................................2
Section 2:.........................................................................................................................................7
Section 3:.........................................................................................................................................9
Assessment task 3:.........................................................................................................................20
Task 1:.......................................................................................................................................20
Task 2:.......................................................................................................................................29
Task 3:.......................................................................................................................................32
References:....................................................................................................................................35

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MANAGE PHYSICAL ASSETS (FINANCE)
Section 1:
Answer 1:
In a work organization as well as in a training institute generally the following physical assets
can be identified:
I. Land.
II. Building.
III. Plant and equipment.
IV. Machinery.
V. Motor vehicles.
VI. Furniture.
VII. Computers.
VIII. Printer.
IX. Air conditioner.
X. Water purifier (Haggerty et. al. 2017).
Answer 2:
Two primary reasons to maintain asset registers are:
I. Asset register helps an organisation to keep track of its assets and thus, maintenance
of assets becomes easier.
II. To keep record of assets such as asset type, date of acquisition etc. for future
reference (Gardiner, 2014).
Answer 3:

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MANAGE PHYSICAL ASSETS (FINANCE)
Following are the eight details recorded in an asset register:
I. Asset name.
II. Asset type.
III. Asset specification.
IV. Date of acquisition of asset.
V. Identification code of the asset.
VI. Method of depreciation for the asset.
VII. Useful life of the asset.
VIII. Insurance details on the asset (Barney, 2017).
Answer 4:
In order to decide the method of depreciation applicable to each type of physical asset the most
important factor to be considered is the extent of use of such asset in the business. The useful life
of the asset is also another important consideration to be kept in mind while determining the
method of depreciation for a particular type of physical asset (Campbell, Jardine and McGlynn,
2016).
Answer 5:
The business objectives determines the extent of use of physical assets thus, the management of
such asset is very much dependant on business objectives. However, the general care and
protection of physical assets remain more or less similar irrespective of business objectives.
Answer 6:

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MANAGE PHYSICAL ASSETS (FINANCE)
Fix on fail:
This is the maintenance program where the physical assets are used extensively without much
maintenance. The physical assets are only repaired and fixed when the assets failed to perform
the required services (Kahn and Lemmon, 2016).
Comprehensive:
In comprehensive maintenance program an organization makes a comprehensive maintenance
plan for physical assets to enhance the life of these assets. Regular maintenance and repairing
work is conducted in physical asset under the program. Thus, the amount of expenditures is
relatively higher under the program. However, the expected lives of physical assets increased
significantly as a result of such maintenance program.
Preventive maintenance program:
In preventive program extensive amount of expenditures is incurred on maintenance of physical
assets with the objective of preventing the break-down of physical assets (Gârleanu and
Pedersen, 2015).
Answer 7:
The list to be followed to establish a maintenance program:
I. The type of physical asset and its specification.
II. The type of work for which the asset is to be used.
III. The number of hours that the asset will be in use each day.
IV. The replacement available for the asset in the organization in case of any break-down.
V. The importance of the asset for the day to day operations in an organization.

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MANAGE PHYSICAL ASSETS (FINANCE)
VI. The cost of the asset and its useful life (Fung et. al. 2016).
Answer 8:
Asset Weekly Monthly Annual
Computers Cleaning and
checking the
computer and
attached cables.
Cleaning the hard
disk and if possible
taking back up.
Formatting after
taking back up.
Compulsory
maintenance and if
necessary installation
of new parts as
required.
Building Cleaning and
checking the fire
system within the
building.
Electric wiring
checking and
repairing.
Annual repairing,
painting and
renovation as
required.
Equipment Oiling and cleaning
the equipment.
Full check-up of the
equipment.
Annual reprinting
and maintenance as
per the maintenance
contract.
Answer 9:
The two factors to be considered while acquiring an asset as far as its environmental impact is
concerned are as following:

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MANAGE PHYSICAL ASSETS (FINANCE)
I. Whether the use of the asset would contribute to the pollution in the environment.
II. The noise and heat to be generated due to the use of the asset in the working place.
Answer 10:
The business objectives have to be evaluated at the beginning. After the evaluation of the
objectives of the business a clear evaluation of the physical asset shall be conducted to determine
how the asset will contribute to the fulfilment of the business objectives. The financial
implications of acquiring the asset is to be determined by evaluating the proposal of acquiring
the asset. Investment appraisal techniques such as Net present value analysis would help the
business to determine whether the asset would be beneficial for the business or not (Campbell,
Jardine and McGlynn, 2016).
Answer 11:
The financial statements of a business shows the financial performance and position of the
business as on a particular period. The ability of a business to acquire an asset at present or in the
future can be very much evaluated from the financial position of the business. The amount of
retained earnings and the liquidity position of a business will very much reflect its ability to
acquire an asset or assets as on a particular date. Also the solvency position of an organization
helps such organization to take loan from banks to acquire assets for business. Thus, both current
as well as future ability of a business to acquire a particular can be evaluated from the
assessment of its financial position. In addition the ability of an organization to make optimum
use of its assets in the future is another factor that will contribute to the decision of an
organization to acquire an asset (Ma, Zhou and Sheng, 2014).

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MANAGE PHYSICAL ASSETS (FINANCE)
Section 2:
Answer 12:
Impact:
In order to assess the impact of a physical asset on the performance of an organization the
following shall be evaluated:
I. The quantum of production.
II. The quality of production.
III. Production costs (Shah, McMann and Borthwick, 2017).
Effectiveness:
In order to assess the effectiveness of a physical asset on the performance of an organization the
following shall be evaluated:
I. How the production processes have changed.
II. The improvement in the goods and services.
III. Use of other resources in production of goods and proving services.
Long-term performance:
In order to assess the impact of physical asset on the long-term performance of an organization
the following shall be evaluated:
I. The profit from business operations.
II. The quality of goods and services whether improved or not.

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MANAGE PHYSICAL ASSETS (FINANCE)
III. Customer satisfaction level subsequent to the use of long-term performance (Green
et. al. 2016).
Answer 13:
Once the analysis of performance monitor is complete the business will be able to take a final
decision as to whether the asset is to be acquired or not. If the performance monitoring indicates
that the acquisition of asset would benefit the business then the asset should be purchased
otherwise the asset should not be purchased (Trappey et. al. 2015).
Answer 14:
Three techniques to be used to establish and implement regular reporting practices on the assets
performance are as following:
I. The efficiency with which the asset is performing.
II. The quality and quantity of goods and services subsequent to the use of the asset.
III. The financial performance of the entity as a result of using the asset (Toepke et. al.
2018).
Answer 15:
Three methods to identify problems with physical assets are:
I. Efficiency method
II. Performance method.
III. Testing method.
Answer 16:

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MANAGE PHYSICAL ASSETS (FINANCE)
The meetings and discussion forums can be used to discuss the condition and deficiencies os
assets with employee and staffs. It is important that the meeting and discussion allow the staff
and employees to put forward their point of views freely (McCabe and Donahue, Raymond Corp,
2017).
Answer 17:
Following three types of specialist assistance may be taken to maintain, repair and deal with
performance issues of physical assets:
I. The expert assistance.
II. The quality appraisal assistance of the asset.
III. Regular maintenance assistance of the asset.
Section 3:
Answer 18:
Three examples of operational requirements and design features provided are as following:
Operational requirements:
I. The refrigerator has anti-mist function.
II. It has a minimum capacity of 1,000 litre.
III. The temperature of the refrigerator can be controlled +1 degree to +10 degree Celsius
(Coffman et. al. 2017).
Design specification:
I. The refrigerator has double glazed door.

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MANAGE PHYSICAL ASSETS (FINANCE)
II. It has both black as well as black and silver exterior.
III. The refrigerator has casters with adjustable shelves.
Answer 19:
Design, operational requirements and budgets are the three types of requirements and parameters
that guide the type of information to be disclosed in an equipment specification.
Design: Design provides significant details such as the colour and exterior of an equipment.
Operational requirements: Operational specification provides capacity of an equipment as well as
it technical parameters of operations.
Budget: Budget generally provides the cost and price of an equipment in the market (Bishop and
Cardozo, Landis+ Gyr Innovations Inc, 2016).
Answer 20:
While writing specifications about a physical asset generally the following two guidelines must
be followed:
I. The operational requirements must be given very clearly to ensure that the
prospective buyers are aware of complete operational and technical specifications
about a physical asset to buy such asset.
II. Ensuring disclosure of all important qualitative characteristics of the physical asset in
the specification to attract buyers.
Answer 21:

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MANAGE PHYSICAL ASSETS (FINANCE)
In order to estimate the cost of acquiring an asset correctly the information about a physical asset
can generally be found on the official website of the company producing such assets. Apart from
that the commodity markets and manufacturing units can be visited to get important information
before taking a final decision.
Answer 22:
In order to communicate with the supplier any one of the following methods can be used:
I. Directly approaching the suppliers by using telecommunication of personal visits to
the supplier premises.
II. Tenders can be invited from suppliers.
III. Confirmations can be requested from the suppliers for different quantity of orders.
Answer 23:
The existing physical assets and their performances must be tested at first. If the performance of
existing physical assets are of not up-to the mark then obviously the business should consider
replacing the existing assets. The replacement decision also depends on the financial viability of
acquiring new asset. If acquisition of new asset is not expected to benefit the business financially
then the decision of acquisition of new asset and replacement of the existing assert should be
postponed.
Answer 24:
Since the responsibility of operations in a new asset is on the shoulder of the workers and
employees thus, it is important to discuss the potential acquisition of new asset with the team that
would operate in the new asset. Without discussion the team and the staffs might feel disgruntled

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MANAGE PHYSICAL ASSETS (FINANCE)
and thus, they might not give their 100% efforts with the new asset. Hence, it is important to
make the employees and team feel part of the decision by discussing the potential acquisition of
new asset and its impact on the business operations.
Answer 25:
Purchasing a physical asset has number of benefits and few drawbacks as well. Let’s discuss one
specific benefit and one specific drawback of purchasing a physical asset.
The benefit of purchasing a physical asset is that the ownership of the asset belongs to the
business and the business can make any use of such asset. The drawback is that the annual
repairing and maintenance expenditures have to be incurred to keep the asset efficient and
operational.
Answer 26:
An operational lease agreement is an agreement between a lessor, generally the owner of an
asset, and the lessee, generally a business, that gives the lessee the right to use an asset for its
business and other operations as per the agreement. It is generally for a short period of time and
the asset reverts back to the lessor after the end of the operating lease period.
Answer 27:
Let’s calculate the net cash outflow under three different option available to use the vehicle to
evaluate which option is most beneficial to make use of the vehicle.
Cash outflow in case acquisition from Bills Bobbin Toyota
Particulars Amount Amount ($)

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MANAGE PHYSICAL ASSETS (FINANCE)
($)
Purchase costs 48,990.
00
Depreciation per year (48990 x 15%) 7,348.
50
Annual expenditures
Annual servicing 2,000.
00
Registration, insurance and other expenses 1,800.
00
3,800.
00
Annual tax savings
Depreciation 7,348.
50
Annual expenditures 3,800.
00
11,148.

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MANAGE PHYSICAL ASSETS (FINANCE)
50
Assuming rate of taxation of 30%
Tax shield (11148.50 x 30%) 3,344.
55
Total tax shield din 5 year (3344.55 x 5) 16,722.
75
Total cash outflow
Purchase cost 48,990.
00
annual expenditures for 5 years (3800 x 5) 19,000.
00
67,990.
00
Less: Total tax shield 16,722.
75
Net outflow of cash over the 5 years 51,267.25

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MANAGE PHYSICAL ASSETS (FINANCE)
Cash outflow in case acquisition from Redwood Motors
Particulars Amount
($)
Amount
($)
Purchase costs 47,890.
00
Depreciation per year (48990 x 15%) 7,183.
50
Annual expenditures
Annual servicing 2,000.
00
Registration, insurance and other expenses 1,800.
00
3,800.
00
Annual tax savings
Depreciation 7,183.
50
Annual expenditures 3,800.

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MANAGE PHYSICAL ASSETS (FINANCE)
00
10,983.
50
Assuming rate of taxation of 30%
Tax shield (11148.50 x 30%) 3,295.
05
Total tax shield din 5 year (3344.55 x 5) 16,475.
25
Total cash outflow
Purchase cost 47,890.
00
annual expenditures for 5 years (3800 x 5) 19,000.
00
66,890.
00
Less: Total tax shield 16,475.
25
Net outflow of cash over the 5 years 50,414.

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MANAGE PHYSICAL ASSETS (FINANCE)
75
Cash outflow in case taken on lease
Particulars Amount
($)
Amount
($)
Weekly lease 355.
00
Annual lease (355 x 52) 18,460.
00
total lease payment in 5 years (18460 x 5) 92,300.
00
Less: Tax shield (92300 x 30%) 27,690.
00
Net outflow of cash under lease method 64,610.
00
Decision:
Since net cash outflow is lowest if the Toyota Tarago is purchased from Redwood Motors
hence, the vehicle should be acquired from Redwood Motors.

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MANAGE PHYSICAL ASSETS (FINANCE)
Answer 28:
The two socialists that should be consulted at the time of consulting about financing an asset are
the following:
I. Financial analysts and
II. Investment banker.
The financial analysts will help the acquirer by providing him with necessary information such
as the monthly and annual instalments to be paid for such number of years to acquire the asset
over a period of time.
The investment banker would help the acquirer by providing him with cost benefit analysis of
acquiring such asset on finance.
Answer 29:
Because the financial agreement contains all relevant terms and conditions that are to be
followed by both the acquirer as well as the financer. In case of any dispute in the future the
document can be used as reference for settlement of such dispute. Thus, the financial agreement
should be documented and safely stored by both the acquirer and financer.

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MANAGE PHYSICAL ASSETS (FINANCE)
Assessment task 3:
Task 1:
Task 1.1: Establish a maintenance and repair program:
Q1:
The selected area is Business administration.
Q2:
The three current assets in the selected area are inventory of raw materials, inventory of finished
goods and accounts receivable of the business.
Three non-current assets of the business administration are equipment, computer and printer.
Task 1.2:
Development of physical asset register:
Name of the
asset
Asset
type
Date of
acquisition
Cost of
acquisitio
n
Useful
life of
the asset
Method of
depreciation
Annual
maintenanc
e date
Land. Non-
current
physica
l asset
01/01/2016 $200,000 Perpetua
l
No
depreciation
After every
six months
Building 01/05/2016 $350,000 10 years SLM Annually

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MANAGE PHYSICAL ASSETS (FINANCE)
Plant and
equipment.
15/06/2016 $125,000 7 years Diminishin
g
After every
three
months
Machinery. 17/007/201
6
$112,500 5 years Diminishin
g
After every
three
months
Motor
vehicles.
18/08/2016 $47,890 8 years SLM After every
three
months
Furniture. 01/09/2016 $28,000 10 years SLM Annually
Computers
.
01/10/2016 $17,500 5 years Diminishin
g
Monthly
Printer. 15/10/2016 $7,500 5 years Diminishin
g
Monthly
Air
conditioner.
17/11/2016 $4,500 6 years Diminishin
g
After every
six months

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MANAGE PHYSICAL ASSETS (FINANCE)
Water
purifier.
18/01/2016 $1,250 3 years SLM Monthly
Task 1.3: Identification of maintenance and repairing requirements:
Computers:
The computers are performing efficiently however, it is important to up-to-date the software and
anti-virus within computers to keep the computers safe and in effective condition. The current
condition of computers are good and these are performing efficiently for the business operations.
The computers are continuously monitored and in case of any issue the services of IT experts are
used to ensure these are in top working condition.
Building:
The building is in operational condition and continuously monitored to ensure that in case any
issues are identified then immediate actions can be taken to ensure that the building is in perfect
condition again. Annual repairing and renovation are carried out to ensure the building is in
operational condition.
Equipment:

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MANAGE PHYSICAL ASSETS (FINANCE)
The equipment is in top condition as it is taken care of regularly without any failure. Necessary
repairing and maintenance work are carried out without missing any deadline to ensure the useful
life of the equipment can be enhanced.
Task 1.4: Establishing a maintenance and repairing program:
Currently the organization is using preventive maintenance program by taking all necessary steps
to ensure that the physical assets are in perfect condition. As a result the possibility of asset
break-down is significantly less. The organization does have a standard policy to maintain the
physical assets carefully. However, the organization should change its maintenance program to
comprehensive maintenance program as prevention program is costing significantly high amount
money to the organization. Thus, the organization should follow the follow comprehensive
maintenance program in the following lines.
The computers should be maintained by taking annual maintenance contacts. The Building
should be maintained annually and there is no need to conduct regular checking on building.
However, the equipment should be tested on regular basis to ensure the same is in perfect
working condition. Necessary internal controls should be instituted to safeguard these assets
from accidents and other incidents.
Internal auditors should conduct testing on internal controls and securities to ensure these are
working efficiently throughout the organization to keep the physical assets safe from any disaster
and other issues.
Task 1.5: Asset maintenance calendar:
Selected Date wise maintenance

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MANAGE PHYSICAL ASSETS (FINANCE)
assets
Computers Taking back
up on last
working day
of each week
Up-to-
dating the
software at
the end of
each month
Maintenanc
e of
computers at
the end of
every 6
months
Annual
maintenance
of
computers
as per AMC
Building Checking the
fire system on
regular basis
within the
building
The
electrical
wiring shall
be cheeked
after very
three
months
Annual
maintenance
and
repairing
work shall
be
conducted
Necessary
renovation
work shall
be carried
out as and
when
necessary.
Equipment Oiling and
cleaning
regularly
Necessary
repairing
and
maintenance
as and when
necessary.
Replacing
the
equipment
in case there
is any issue
that risks the
lives of the

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MANAGE PHYSICAL ASSETS (FINANCE)
employees.
Task 1.6: Reporting practices:
The physical assets shall be maintained properly and there should not be any let down in the
maintenance program of the organization. The efficiency and effectiveness of business
operations of the organization is very much dependant on the ability of the organization to keep
the physical assets in operational conditions. In order to keep these assets in proper condition it is
important to have proper maintenance program. The existing maintenance program is certainly
very effective but costly at the same time. Thus, the organization has to shift from protective to
comprehensive maintenance program.
Task 1.7:
Q1:
Business objectives:
I. To maintain the operational efficiency of physical assets.
II. To enhance the useful life of the asset.
III. To improve the quality of products and services offered by the business.
The preventive and comprehensive maintenance programs support each of the above three
objectives mentioned. However, the preventive program is little costly whereas the
comprehensive program if used properly could be very beneficial to an organization.
Q2:

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MANAGE PHYSICAL ASSETS (FINANCE)
Apart from the information that have been mentioned in the asset register the following three
types of information can also be included in asset register:
I. The asset identification code.
II. The name of the vendor and supplier of the asset.
III. Place of location.
Q3:
Depreciation is the amount of provision provided against the assets for use of the same in the
business. This is a charge created against the profit to provide for the use of a non-current
machine for generating revenue.
Q4:
Year Prime cost method Diminishing value method
Depreciation $ Book
value $
Depreciation $ Book
value $
0 3400 3400
1 680 2720 1020 2380
2 680 2040 714 1666
3 680 1360 499.8 1166.2
4 680 680 349.86 816.34
5 680 0 244.902 571.438

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MANAGE PHYSICAL ASSETS (FINANCE)
Note: For diminishing balance method 30% rate of depreciation has been used.
Q5:
Motorized vehicles require comprehensive maintenance as such vehicles require significant
amount of maintenance.
Large and small electrical equipment require fix on fail maintenance program.
Glass and dishwashers require preventive maintenance program.
Refrigerator, cooling and heating equipment require preventive maintenance program.
Q6:
Acquisition:
I. Making sure that the vendor and supplier follows the green practices.
II. The asset is environmental friendly.
III. The asset will not contribute to the pollution level.
Maintenance:
I. The maintenance program has been prepared keeping in mind the environmental
sustainability.
II. The materials to be used for maintenance is environmental friendly.
III. The annual maintenance program is commensurate with environment sustainability.
Q7:

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MANAGE PHYSICAL ASSETS (FINANCE)
As already mentioned earlier the ability of an organization to acquire assets at present as well as
its potential to acquire assets in the future is determined from its financial position. The liquidity
and solvency position both will indicate the ability of the organization to acquire physical assets
at present and in the future.
The questions to be asked:
I. Do the organization have necessary financial resources to acquire the asset?
II. Do the organization has the solvency position to apply for a loan to acquire such
asset?
III. Do the organization have necessary resources to make optimum use of the asset?
Q8:
Type of
audit
Assets
affected
When conducted Why conducted
External
audit
Non-
current
assets as
well as
current
assets
Annually To express an opinion on the financial
statements
Internal audit Non-
current
assets as
Annually To ensure that the internal controls and securities
are working effectively.

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MANAGE PHYSICAL ASSETS (FINANCE)
well as
current
assets
Concurrent
audit
Non-
current
assets as
well as
current
assets
Regularly That assets are safeguarded and the operations
are working correctly
Q9:
Following factors affect when scheduling internal and external audit:
I. The operations within the organization.
II. The safeguards of assets.
III. The instant security and controls.
Task 2:
Task 2.1:
Computers are used in day to day business operations and must be in working conditions in order
to ensure smooth operations of business in the organization. The computers must be maintained
properly in order to ensure these are in perfect condition. Often the computer slows down as a

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MANAGE PHYSICAL ASSETS (FINANCE)
result of improper maintenance. It is important to ensure that asset is monitored and maintained
properly to be in working condition throughout its life cycle.
Building is one of the most important assets of business. Since the operations of an organization
are conducted in a building it is important that the building is in proper condition. Often lack of
maintenance of building leads to number of problems to a business. In fact also leads to increase
amount of risks to the lives of employees and workers of an organization. Thus, regular
maintenance of wiring, firing system and the building itself shall be conducted.
Equipment is used for day to day operations of an organization. In case equipment breakdowns
during the time of production then the production will be affected and so will be the financial
performance of an organization. It is important to ensure that the maintenance plan of equipment
is effective to keep the equipment in working condition.
Task 2.2:
Assets Efficiency Effectiveness Quality
Computers The computers are
efficiently working or
not.
Whether the
operations carried put
in computers are
effective
The quality of
operations conducted
by using computers
are of relevant
quality.
Equipment The equipment is
efficiently working or
not.
Whether the
operations carried put
in equipment is
The quality of
operations conducted
by using equipment is

30
MANAGE PHYSICAL ASSETS (FINANCE)
effective of relevant quality.
Building The buildings are in
efficient condition
Whether the
buildings are in
correct condition
The quality of
operations conducted
in the building are not
adversely affected
due to the condition
of the building.
Task 2.3:
Q1:
For computers the annual report of concurrent auditors on the efficiency of computers is the most
effective document as it includes the finding of the concurrent auditors was on the basis of the
operations conducted on computer thorough out the year.
For building it is the physical verification of asset as well as the ownership document that is most
useful to monitor the performance of the asset.
In order to monitor the performance of equipment the production report has been the most
helpful and effective.
Q2:
Survey, questionnaire and reviews should be used.
Q3:

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MANAGE PHYSICAL ASSETS (FINANCE)
The formal and informal feedback will provide both official as well as actual experience of users
of different assets.
Task 3:
Assets Current needs Future needs
Computers 10 Annual increase of 10
Building 1 Expected to add 1 after three
years
Equipment 2 Annual increase of 2
The potential increase must be met by acquiring these assets. Obviously it is not possible to
finance all these additions to physical assets from own source of the organization thus it should
consider taking loan or financing these assets. Apart from that discussion with workers and
employees show that they are willing to train and work hard to improve the quality of products
and services.
Task 3.2:
At present the organization is considering replacing its 3.5 Horse power equipment by 5.5 Horse
power for increasing the quantity of production in the future. The equipment has following
specifications:
I. It is 5.5 HP powered.
II. The capacity of production is 10,000 units compared to 5,500 units of current
equipment.

32
MANAGE PHYSICAL ASSETS (FINANCE)
III. It has external shelves to store extra units at the time of production even if the
supervisor is not present.
Environmental sustainability polices are met as the new equipment is even more environment
friendly than the existing equipment.
Task 3.3:
The current financial position of the organization is extremely good however, the cost of new
assets are quite high. Considering the business is entering into a new phase with expansion
strategy thus, using hire purchase and lease agreement for significantly high valued assets is
seems better option financially.
Equipment 5.5 HP:
The organization is looking to take on lease the 5.5 HP Ex model to increase the quantity of
production. The annual lease has been quoted by the lessor is $25,000 for a lease agreement of 5
years period. The asset current costs $150,000 and has a useful life of 12 years. The organization
should take the asset on lease as the cost of acquiring is quite high.
Machinery:
The organization is looking to replace its existing machine by acquiring new model to pack the
finished products. The new machine is expected to costs $40,000. However, the machine can be
taken on lease with annual lease payment of $6,500. Thus, the machine should be taken on lease.
Task 3.4:
Q1:

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MANAGE PHYSICAL ASSETS (FINANCE)
I. Searching the official website of the equipment and machines.
II. Verifying and comparing the information with the information obtained earlier.
III. Following quotation and tenders of producer of similar types of assets.
Q2:
Once the purchase price or lease agreement in this case finalizes the agreement shall be prepared
and signed by both lessor and lessee. The business being the lessee must store and keep the copy
of the agreement safe. All necessary details about annual lease rent and the other terms and
conditions shall be discussed and preferably mentioned in the lease agreement.
Q3:
The information about annual lease payment, the term of lease, the annual service charge and
other details relevant to the assets shall be recorded and filed by the business.

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MANAGE PHYSICAL ASSETS (FINANCE)
References:
Barney, J.B., 2017. Resources, capabilities, core competencies, invisible assets, and knowledge
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