Problem: ABC Ltd. produces an MP3 player. The market for this product is increasing, and for this reason, ABC is planning to expand its production capacity. This plan requires new machinery and an increase in working capital that would be financed with borrowing.
Complete the following:
Question 1. What are the main sources of finance that can be considered?
Question 2. What are the main factors that should be taken into consideration when deciding on the mix of long-term and short-term borrowing necessary to finance the expansion?
Question 3. Identify and discuss the major factors that a bank would take into account before deciding whether to grant a loan to ABC Ltd.