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Saturday, May 16, 2009

Calculate Your Capital

The decision to set up savings or insurance for children often make their parents upset. Savings and insurance have a different function. Savings account is that we open in the bank, but we can take at any time. While insurance is the protection provided by insurance companies to us if we have the risk.

Often, we just ask people who have a business: "How much capital do you need first is when you open a business that now?". Answers that often appears is: "... the thousand dollars ...." correct right? Principally, there are a number of exit. But, if you asked like that, you can’t say. Because usually when we want to run a business, many of us who do not know how to calculate.

This time I will share a secret to you about how to calculate the amount of capital you need when you want to start a business.

In principle, in running a business, there are only 3 types of capital that you will spend:

1. First Capital Investment
2. Working Capital
3. Operational Capital

Let's discuss one by one.

1. First Capital Investment
What is the initial capital investment? This is the type of capital that you need to spend at the beginning, and is usually used for long-term. Examples of this capital is the building, equipment such as computers, vehicles, office furniture and other goods used for the long term.

If your business about workshop motor business, so your initial capital investment is the building, workshop equipment, and other furnishings that are needed in the workshop. If your business stores, so your initial capital investment is a shelf, table, and may also cashier machine.

Usually, this capital value is large enough to be used because the long term. But the value of First Capital Investment will dwindle from year to year can be even from month to month.

2. Working Capital
This is capital that you need to spend to buy or make your merchandise. Working capital may be issued each month, or every order comes.

For example, if your business about food business, the working capital you need is capital to buy food. If your business about made craft goods, then your work capital is money you spend to buy the raw materials. If your business is photocopying services, working capital so you spend your money to buy paper, ink, and so forth.

Principle, without working capital, you will not be able to complete your order or do not have the merchandise. Later, you can-can in fact can’t be buyer because the goods are not there. That is the importance of working capital.

3. Operational Capital
Capital is the last operational capital. Operational capital is capital that you need to spend to pay the monthly cost of operating your business. For example employee salary payments, monthly phone credit, electricity, water, and even retribution.

Post-operational capital in the post this on every business in general is almost the same. This is because, in principle, is the operational capital is money that you need to spend to pay for the cost of items outside of your business directly. So, Capital Operations are usually paid on a monthly basis.

Easy, huh? Now, you can calculate your own, eh, the capital that you need to remove to start the business. Hopefully it’s useful for you.
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