Paul Chaney Business

Posts Tagged ‘investment capital’

In principle, in running the business, there are only three types of capital that you would exclude:

1. Initial Investment Capital
2. Working Capital
3. Operating Capital

Let us discuss them one by one.

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1.Investment Capital
What is meant an initial investment capital? This is the kind of capital should you spend in the beginning, and is usually used for the 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 is operating the motor repair shop, then your initial investment capital is the building, workshop tools, and other furnishings that are needed in these workshops. If your business stores, then your initial investment capital is a shelf, table, perhaps even register.

Usually, this capital value is large enough for use in the long term. But the value of the Initial Investment Capital will shrink from year to year even from month to month.

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

For example, if your business is eating place of business, then the working capital you need is capital to buy groceries. If your business development efforts made craft goods, then your working capital is the money you spend to buy raw materials. If your business is photocopying services, working capital yes you the money you spend to buy paper, ink, and others.

Principle, without working capital, you will not be able to complete your order or do not have merchandise. Later, you might not even going to be a buyer because the goods are just not there. That is the importance of working capital.

3. Operational Capital
The last capital operating capital. Operational capital is capital that you need to spend to pay the monthly operating costs of your business. For example payment of salaries, monthly telephone costs, electricity, water, and even retribution.

Outposts in the capital was in all business operations are generally quite similar. This is because, in principle, the meaning of operational capital is money should you spend to pay for items outside of your business expenses directly. So, these are usually Operating Capital payable monthly.