Loans
Borrowing arrangement; money provided to be repaid with interest.
Formula
Total Loan Cost = Principal + (Interest Rate × Principal × Time)
Real World
When Brew Dog expanded its brewery in 2015, it took out a long-term secured bank loan using its premises as collateral, spreading repayment over years to match cash inflows from production.
Exam Focus
Always state whether a loan is secured or unsecured and link to the business's risk profile when answering 'justify' questions.
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