what is content of purchase order?
Answer / jones
when an indentor raise for the products / material he/she
wants i.e product name , no of unit ,to the purchase
officer. The puchase officer collect the quotation for the
same from the different dealers and issue the po to the
lowest quoted person.
The purchase order contain the
specification of the product, rate of the product, unit of
the product and total amount of the same. and also tax part
should be mentioned wheather the afore said amount is
included of Taxes or not.
The PO also contain of Terms and Conitions
depends upon the products. like payment terms, delivety
time. warranty period, delivery place, any performance
bank guarntee needed before release of Payment.according to
product the terms & Conditions changes.
The p.o is legal document for the dealers, the dealers act
according to the P.O . So before issuing P O go through
their quotaion properly and issue the same to avoid
unneccesary problems.
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DHPL is a small sized firm manufacturing hand tools. It manufacturing plan is situated in Haryana. The company’s sales in the year ending on 31st March 2007 were Rs.1000 million (Rs.100 crore) on an asset base of Rs.650 million. The net profit of the company was Rs.76 million. The management of the company wants to improve profitability further. The required rate of return of the company is 14 percent. The company is currently considering an investment proposal. One is to expand its manufacturing capacity. The estimated cost of the new equipment is Rs.250 million. It is expected to have an economic life of 10 years. The accountant forecasts that net cash inflows would be Rs.45 million per annum for the first three years, Rs.68 million per annum from year four to year eight and for the remaining two years Rs.30million per annum. The plant can be sold for Rs.55 million at the end of its economic life. The company would need to raise debt to the extent of Rs.200 million. The company has the following options of borrowing Rs.200 million: a. The company can borrow funds from a nationalized bank at the interest rate of 14 percent for 10 years. It will be required to pay equal annual installment of interest and repayment of principal. b. A financial institution has offered to lend money to DHPL at 13.5 per annum but it needs to pay equated quarterly installment of interest and repayment of principal. Questions: 1. Should the company expand its capacity? Show the computation of NPV 2. What is the annual installment of bank loan? 3. Calculate the quarterly installments of the Financial Institution loan 4. Should the company borrow from the bank or from the financial institution?
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