The entrepreneurs should have right amount of capital at the right time to meet his financial requirement.
Short term or Working Capital Requirement:
- Usually one year financial needs
- Current Assets: Cash, stock, credit, sales, semi-finished goods.
- Raw material.
- Operational losses.
- Advances to suppliers.
- Commission to selling agents
- Interest on loans.
- Expenditure on wages, salaries, rent, advertising etc.
- Expenditure on consumables.
- Day to day administrative expenses.
Long term capital requirement:
- Fixed assets:
- Land and building
- Furniture
- Motor-Vehicles
- Plant and Machinery etc.
- Cost of setting up enterprise
- Intangible assets like goodwill, patents etc.
- Margin money required for raising working capital requirement.
- Manufacturing Unit: More Fixed Assets
- Trading Units: Less Fixed assets, more current assets & Working capital
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