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Find Your Working Capital Requirement

Now that you know why working capital is critically important to keep an organization running, the next step is to estimate how much you need. Hypothetically speaking, if all transactions were in cash and done with no time lag, the working capital requirement would be zero.

To illustrate this point, let’s suppose a company buys goods for $100 from A and at the same instant sells the entire stock to B for $250. It makes a gain of $150 without holding any stock or even, needing cash because there is no time lag between the two transactions. Therefore, its working capital requirement is zero.

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Why Are Some Startups Wary Of Equity Venture Capital

On an average, out of every 10 startups 1 will be truly successful; 3 will completely fail; and the rest will tide along till they too collapse, or get taken over. The reasons could be numerous, ranging from weaker domain expertise to lack of planning. However, limited access to required funds still poses the biggest challenge for a budding enterprise. Once the seed capital (mostly supplied by entrepreneur’s own savings or by friends or family) runs out, the need to arrange alternative means to remain afloat becomes an imperative.


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