Business Plan – Finance

The banking system and loaning institutes as well as investors play a major role in raising the capital necessary to begin a new business. They place certain financial requirements and other demands before they supply the money for initial operating costs. A business needs to establish collateral, this is an asset of value that the individual or company has that the bank or loaning institution can take if the debtor is unable to repay the loan

A certain business plan must be drawn up that has a realistic plan of turning a profit and repaying the loan. Banks and other lenders will establish an idea of the financial fitness for a business loan. So the company or individual must have a good history of repaying loans.

Overdraft

This occurs when money is withdrawn from bank account and the available funds go below zero. Interest is normally charged from the account provider for the repayment of the overdraft.

Overdrafts

This refers to an ongoing expense of operating a business, the costs include; fixed costs, variable costs as well as indirect and direct costs

Employment subsidy

This serves as an incentive for the business to provide more job opportunities to reduce level of unemployment in the country.The government provides assistance with wages. It allows a person receiving the benefit to enjoy some minimum standard of living.

Knowing the financial aspects of running a business is important with regards to accounting and money handling. Having a knowledge of these areas will greatly help with knowing what to spend money on and also what a business manager does not want to happen with the money of the business.

Solvency

This is the degree to which the current assets of an individual or company exceed their current liabilities, and can be described as the ability of a company to meet its long term fixed expenses and accomplish long term expansion and growth.

Indebtedness

This is the state of being in debt, or the level of the liability of the debtor. With regards to accounting, it is used to know how much a debtor owes a creditor.

Profit Margin

This is a ratio of probability calculated as net income divided by sales. It measures how much money of sales a company actually keeps in earnings, this is useful for comparing companies in similar industries. A gigher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.

Cash Flow

It is the movement of money in or out of the business. It is usually measured during a certain period, like a couple of months. And this measurement can be used for calculating other parameters tat give information on a company value and situation

Market Share

This  is the percentage of a market, accounted for by a certain industry of business, such as the “car” industry. Increasing market share  is one of the most important goals a business should focus on, because by having more market share means the business owns more of the market. Market share shows how well a business is doing against its competitors.

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