Answering Non-Current Asset Scenario Based Questions (SBQ)
In this lesson, we will learn a step-by-step approach to answering scenario-based questions on non-current assets. This includes learning how to identify positive and negative points in the scenario to support and justify our decisions.
Related Lessons:
Steps to Answering Scenario Based Question
In answering a scenario-based question, we have to choose between two choices. This must be clearly stated in your answer.
We need to support our choice with three reasons obtained from the question. For each reason, we must explain why it support our decision and what benefit does it brings to the business.
Answering Non-Current Asset SBQ
There are two scenarios that we may be asked to advise in a non-current asset scenario-based question. We may be asked to advise the business on which of the two non-current asset it should buy based on the business needs, or should the business buy or lease the selected non-current asset.
To choose between two non-current assets to buy, the business would usually prefer one that offers the most value for the least price, cost effective to maintain, can meet most of its needs.
In situation where the business needs to decide between buying and leasing, we need to take in consideration the business financial ability. Business with tight cashflow may prefer leasing to retain cash.
We also need to consider the changing need of the business for the non-current asset in the future. For example, if the business expects a change in its requirement, then leasing gives the flexibility compared to buying.