The annual carrying costs are US $12,750 for the warehouse, US $1,500 for insurance, II and US $2,260 for proper taxes. These costs total US $16,500. In addition, the company desires a 12% after-tax return on investments. Because the tax rate is 40%, the 12% aftertax return equals a 20% before-tax return 12% - 60%). A 20% return on the US $75,000 average investment in inventory is US $15,000. Hence, the total carrying cost is US $31,500 $16,500 + $15,000). This amount is 42% of the US $75,000 investment in inventory.

Potential ordinary shares are contracts that may entitle holders to obtain ordinary shares. They include options, warrants, convertible preference shares, convertible debt, and contingently issuable shares. Unlike an option nonconvertible preference shares are never potential ordinary shares.

Cash inflows for March would consist of 50% of March credit sales US $90 x 50% = US $45). Plus 30% of February credit sales US $120 x 30% = US $36). plus 20% of January credit sales US $ 11-11. 20% = US $20). plus cash sales for March of US $18.
Consequently, total collections equal US $1 18,000.

Potential loss is the amount of dollar damages associated with a security problem or loss of assets. Potential loss times the probability of occurrence is an estimate expected value) of the exposure associated with lack of security. It represents a potential benefit associated with the implementation of security measures. To perform a cost-benefit analysis, the costs should be considered. Thus, all three items need to be addressed.