Simon intends to start his own business selling specialist wines. Some of his sales will be for cash from a shop that he intends to rent. He also plans to sell some wine on credit to local restaurants and hotels. The details of his business plan are as follows:

1. He will rent a shop for 14,000 per annum payable quarterly in advance. The landlord also requires a deposit of 5,000 to be paid when the rental starts in June.

2. He will invest 13,000 from his own savings and his father will loan him 7,000. His father will charge interest at a rate of 2.5% per annum payable annually after an interest free period of 6 months

. 3. Simon will purchase and pay for 13,000 of wine in June. Thereafter, to maintain the same level of inventory, he will purchase wine to replace what is sold.

4. Suppliers will allow one months credit and credit customers will expect one months credit.