Capital Finance Basics
The capital finances can be used to plan or address several different platforms such as replacement decisions to maintain the general business entity, the focus on existing products or changes for market expansion, new products and services, regulatory, safety and environmental issues or any other major changes that require a substantial amount of funds to be utilized over a period of at least one year.
The necessity of having the information to run the capital finance platform is important as if effects the general direction the company intends to take, for the immediate future.
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This will also dictate the direction and also how it’s going to affect the long term future of the company. Since most projects commence based on the capital financing allowances, there is a need to ensure the project is capable of yielding the desired result the long term time frame requires.
Locking in the commitment levels of all departments within the entity, provides the resources to only this plan, leaving little room for other considerations or changes.
Decisions on the purchases of assets, manpower expansions and other complimenting tools that are needed for the forecast done through the capital finance planning will eventually take shape once such financing is arranges and approved.
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Factors Determining Fixed Capital Requirements
Not all fixed capital budgets are the same nor are they all fitted squarely into any particular frame where one budget fits all. There are several factors that play a defining role in the eventual fixed capital required for any endeavor.
The following are some of the factor that may contribute in some way to the amounts required within the fixed capital frame:
The nature of the business entity is one of the dictating factors that will affect the fixed capital. Within the platform there are several smaller considerations to be taken into account such as the size of the business entity, the products it will be dealing in, the type of production processes and may other defining elements that constitute the smooth running of the business entity.