Question

A shipping line is considering purchasing some new ships at some time in the future and has asked you as an expert to explain five main factors that have to be taken into account in considering the purchase of a new ship.

Answer 1

Five factors which will be considered before purchase of the new ships are as follows-

A. The cost of the ships has to be properly assessed and it needs to be properly compared. The most economical method is to be adopted.

B. The cost of finance for those purchases should be properly analysed and how that would be funded is an important factor in deciding upon the overall purchase of ships.

C. A large number of suppliers are also to be considered before purchase of ships and those supplierssuppliers who are having a potential benefits and a long term relationship criteria should be preferred.

D. The ships will be purchased with long term perspective and the benefits of purchase should be accruing over a large period of time rather than a shorter period of time.

E. the purchase of these ships will also be considered after opportunities cost available to the company so various opportunity cost are to be properly analysed and then the best possible methods are to be adopted because cost of opportunities are relevant costing criteria.