Your facility wants to purchase new golf cars. What is the best method to determine whether the facility can afford to acquire an expensive model?

Your facility wants to purchase new golf cars. What is the best method to determine whether the facility can afford to acquire an expensive model?

• A. Forecast revenue, expenses, and income
• B. Review only the purchase price against the budget
• C. Ask the club president for approval
• D. Check the depreciation schedule alone

Answer: (A)

Determining whether the facility can afford a costly golf car model hinges on projecting the financial flow you’ll actually have to fund, not just the price tag. By forecasting revenue, expenses, and income, you gain a clear view of future cash flow: how much money will come in from operations, what costs will be incurred to run and maintain the fleet, and how buying the new model would affect overall profitability and available capital. This process helps assess whether there is enough cash, or enough borrowing capacity and reserves, to cover the upfront cost and any financing charges, while still meeting other financial commitments. Other approaches fall short because they don’t capture the full financial picture. Looking only at the purchase price ignores ongoing operating costs, maintenance, insurance, financing, and how the investment will impact cash reserves over time. Relying on the club president for approval addresses governance rather than the actual ability to fund the purchase. Checking the depreciation schedule focuses on accounting treatment and tax effects, not cash availability or the facility’s capacity to fund the purchase today and into the future.

Determining whether the facility can afford a costly golf car model hinges on projecting the financial flow you’ll actually have to fund, not just the price tag. By forecasting revenue, expenses, and income, you gain a clear view of future cash flow: how much money will come in from operations, what costs will be incurred to run and maintain the fleet, and how buying the new model would affect overall profitability and available capital. This process helps assess whether there is enough cash, or enough borrowing capacity and reserves, to cover the upfront cost and any financing charges, while still meeting other financial commitments.

Other approaches fall short because they don’t capture the full financial picture. Looking only at the purchase price ignores ongoing operating costs, maintenance, insurance, financing, and how the investment will impact cash reserves over time. Relying on the club president for approval addresses governance rather than the actual ability to fund the purchase. Checking the depreciation schedule focuses on accounting treatment and tax effects, not cash availability or the facility’s capacity to fund the purchase today and into the future.