A business cannot be started very easily as we think. It needs a lot of things and the most important thing need to start-up and runs a business is a finance. Without money, it is very complicated to run a businessman. The investment is the main factor for every business. We have to initially invest some bigger amount to get profits in the future. Even the traders who use automated trading robot need some amount to register in the software and a deposit amount to do trading with it. So every business needs some bulk amount. There are many types of financial needs of a business. Let us take a look at it and discuss in brief.
- Fixed capital:
Fixed capital is the amount we out into the business for the purchase of some fixed and durable assets like the land or the buildings to build an office, the machines needed for the business and the general things needed for the business like chairs, tables and all. The size of the business will determine how much money it actually needs. If it is a large enterprise, then the fixed capital will be a bigger amount and if it is a small business, the capital amount will be less. Obviously, the businessmen will get the capital amount whatever they put in as the profit. But the only disadvantage in the fixed capital is the amount we put in for this purpose cannot be withdrawn and reuse for another purpose.
- Working capital:
The working capital is the amount we send for the current assets that are the amount for repairing the machines, the rent we pay for the building, electricity and fuel charges etc.. We can also call this as circulating capital because the amount we use for this capital will get circulated a scan be reused for many other purposes in a business. This is mainly based on the nature of the business and the time taken for completing the process. If the process takes much time, then the working capital will get an increased and vice verse. Mostly the trading companies need more working capital amount when we compare it with the other manufacturing companies.
- Long-term capital:
It is the amount we out in for the longest time that is more than five years. It includes the issue of shares and the issue of debentures.
- Short-term capital:
As the name sounds, it is used for the shorter period of time. Not including the basic day by day expenses like trade credit and the installment credit.