Can You Explain The Financial Needs Of A Business?


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Rabbia Pasha answered
Financial needs of a business:
1) Cost of fixed assets;
Finance is required for meeting the cost of fixed assets such as land, building, machinery and other necessaries for establishing new enterprise.

2) Cost of current assets:
A firm needs capital to meet its running or operating expenses such as cash, stock of goods, etc.
3) Cost of promotion;
Every business needs capital for meeting the preliminary expenses and assembly of business concern such as legal fees, filing fees, registration fees and publication of documents etc.
4) Cost of financing:
Capital is also required by an organization for paying commission for underwriters, brokerage on securities, etc.

5) Cost of establishing the business;
A firm also needs capital top meet the losses which are incurred in developing the business to a self sustained stage.
6) Cost of intangible assets;
Capital is required for spending on purchasing patent rights or goodwill, etc.
7) Selling on credit:
Goods are mostly sold on credit in the market. Since the expenditure on producing the goods is usually on cash basis, whereas the sale is mostly credit, therefore, the funds are required to cover the time period.
All the financial requirements of the business listed above are classified into
Fixed or block capital
Working capital

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