Tuesday, March 9, 2010

PROVISION OF CAPITAL

Capital is the life blood of business. No business can be established and conducted without capital. But the volume of capital varies according to the nature and size of the business. Hence before starting a new business requirement of capital and the source for collecting capital should be determined. Every business needs fixed capital in the form of land, building, machinery, furniture, etc. In addition, working capital is required to purchase raw materials and to meet day-to-day business transactions. Thus, capital requirement is estimated by ascertaining the amount essential for fixed capital and working capital relating to the establishment of business. The business should acquire adequate capital. If the capital is less than the requirement, it becomes difficult to conduct the business whereas excess capital cannot earn sufficient profit, which have adverse effect on the business goodwill.

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