We have said that funding can be obtained from banks or third party, in this case we will talk about capital funding, or will be the same contractor to place a certain amount called risk capital, when there is a society it is called corporate capital.
Both the credit capital is the equity or venture is called financial capital.
To know how you made capital company and need to know and demonstrate the following:
- how is employed;
- from who come in
In order to get the necessary funding for the continuation of production is necessary to calculate the financing gap.
It is equal to the volume of transactions in progress (meaning the total costs already incurred but not yet recovered from the proceeds).
We have three hypotheses to talk about.
The first hypothesis we have at the moment when all costs are anticipated in this case the financing requirement will be equal to the sum of all costs.
The second hypothesis we when revenues are anticipated, in this case the financing needs will be the amount of the upfront costs subtracted from the revenues anticipated.
In the third case in which there will be all revenues anticipated, in this case, the requirement will be zero because the sum of the costs deducted from the total revenue will be a negative (or positive because the revenues will be greater than the costs).
These cases, however, can not be used in the real world where costs and revenues are intertwined and needs are different from year to year.
There are two possible solutions: by calculating the demand without interest or with interest expense.
Without interest calculation in three years, will be:
F = financing Ic = installation costs Oc = Operating costs Fl = fluid In= incoming
Fl = I – Oc
index numbering per year from 0 to 3 (on if you take into consideration more years)
Calculation of the requirement without interest:
F0 = Ic
F1 = F0 – Fl1
F2 = F1 – Fl2 = F0 (Fl1 + Fl2)
F3 = F2 – Fl3 = F0 – (Fl1 + Fl2 + Fl3)
If, however, there were interest calculation would be:
i = interest earned by the fund
F0 = Ic
F1 = F0 (1 + i) – Fl1
F2 = F1 (1 + i) – Fl2
F3 = F2 (1 + i) – Fl3
And it's necessary not only to calculate the exact financing needs, but also make sure that liquidity is not less than the real need, this is because it would be the economic balance of the company.
It's just as dangerous to have an exaggerated surplus liquidity if it is not used, invested in other activities such as research, for example.
If the available assets is greater than the financing needs we talk about financial doldrums, but otherwise, it will have a financial tip.
Be careful administration, means to have a board capable of understanding the reality of your company so that you do not have spikes or financial doldrums, in the first case is avoided not to pay all amounts due, while in the second case avoids pay fees and interest payments to lenders for partially used.
Rashna