Initial Post By Ha Voevery Business Needs Capital To Run And Theyre ✓ Solved

INITIAL POST BY HA VO Every business needs capital to run, and they're no exception to that matter. Capital can be included in many different ways; it can be held in deposit accounts, tangible machinery like production types of equipment, storage buildings, and more ( Cameron Jan 2016). There are two different types of capital; fixed capital and working capital. The fixed capital can be categorized under company software, brand names, bank accounts, stock, or company building. Working capital is funding; it can be interrupted if payment is not received timely.

Customers are expected to pay when they get their products and services done. However, unpay customers past their pay period can negatively affect the company. From the customer point of view, the longer the lengthy payment term, the more favorable for the customers to use the cash to cover other expenses. The delate of paying their bills will increase the chance of success in their business to use the cash flow somewhere else to generate more income by buying time. At the same time, customers can use their working cash capital to fulfill their daily business needs.

The customers can also use the term payment without the burden on interest charges. The longer the payment terms, the more cash for the customers on their hands to run their own business with protection. Customers are also more attractive to buy more from suppliers with flexible payment terms. Customers are less worried about paying more interest on working capital loans to use the suppliers' supplies to generate income and profit. Most suppliers want to make a sale all day long.

The supplier wants to sell it product fast and in large amount if possible. There are many credit forms out there to promote the sale. Many suppliers offer a deal on credit terms for fast selling, so that product movement is staying active. The more products sold, the more the business growth. However, if they are all sold on pay terms credit and not pay on time, it can block the working capital.

Working capital not available can negatively damage the business. Therefore, if the gap between the payment of the sold good on credits and the operational capital needs is too large, the company can be in trouble. At the same time, suppliers don't want to be so strict on credit payment terms; they want to be careful not to lose their buyers to their competitors. Hebrew 13:16, do not neglect to do good and to share what you have, for such sacrifices are pleasing to God. It is a helping hand to other businesses to run their business smoother with payment terms.

It is like a short-term loan with no interest. It is ethical for trade credit in buying power, with the agreement that payment will be received at the future's agreed date. Since the suppliers usually provide goods or services already to the customers, they need to fill the payment terms. References Cameron, Amanda (Jan 15, 2016). What is Capital?-A Guide for Your Small Business Accounting.

Retrieved from What Is Capital? | A Guide for Your Small Business Accounting (patriotsoftware.com) Bible Hebrew 13:16 INITIAL POST BY HA VO Every business needs capital to run, and they're no exception to that matter. Capital can be included in many different ways; it can be held in deposit accounts, tangible machinery like production types of equipment, storage buildings, and more ( Cameron Jan 2016). There are two different types of capital; fixed capital and working capital. The fixed capital can be categorized under company software, brand names, bank accounts, stock, or company building. Working capital is funding; it can be interrupted if payment is not received timely.

Customers are expected to pay when they get their products and services done. However, unpay customers past their pay period can negatively affect the company. From the customer point of view, the longer the lengthy payment term, the more favorable for the customers to use the cash to cover other expenses. The delate of paying their bills will increase the chance of success in their business to use the cash flow somewhere else to generate more income by buying time. At the same time, customers can use their working cash capital to fulfill their daily business needs.

The customers can also use the term payment without the burden on interest charges. The longer the payment terms, the more cash for the customers on their hands to run their own business with protection. Customers are also more attractive to buy more from suppliers with flexible payment terms. Customers are less worried about paying more interest on working capital loans to use the suppliers' supplies to generate income and profit. Most suppliers want to make a sale all day long.

The supplier wants to sell it product fast and in large amount if possible. There are many credit forms out there to promote the sale. Many suppliers offer a deal on credit terms for fast selling, so that product movement is staying active. The more products sold, the more the business growth. However, if they are all sold on pay terms credit and not pay on time, it can block the working capital.

Working capital not available can negatively damage the business. Therefore, if the gap between the payment of the sold good on credits and the operational capital needs is too large, the company can be in trouble. At the same time, suppliers don't want to be so strict on credit payment terms; they want to be careful not to lose their buyers to their competitors. Hebrew 13:16, do not neglect to do good and to share what you have, for such sacrifices are pleasing to God. It is a helping hand to other businesses to run their business smoother with payment terms.

It is like a short-term loan with no interest. It is ethical for trade credit in buying power, with the agreement that payment will be received at the future's agreed date. Since the suppliers usually provide goods or services already to the customers, they need to fill the payment terms. References Cameron, Amanda (Jan 15, 2016). What is Capital?-A Guide for Your Small Business Accounting. Retrieved from What Is Capital? | A Guide for Your Small Business Accounting (patriotsoftware.com) Bible Hebrew 13:16

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Capital is a fundamental element of any business operation. It serves as the lifeblood that facilitates production, ensures smooth operations, and ultimately drives profitability. This essay delves into the different types of capital, their roles in business functioning, and the implications of credit terms from the perspectives of both suppliers and customers.

Definition of Capital

At its core, capital refers to the financial resources required for a business to engage in production and provide services. There are two primary forms of capital: fixed capital and working capital. Fixed capital includes long-term assets such as buildings, machinery, and technology that are necessary for the production process (Cameron, 2016). Meanwhile, working capital refers to the short-term liquidity needed for day-to-day operations, encompassing debts, accounts receivable, and current liabilities (Nwogugu, 2013).

Fixed Capital

Fixed capital is crucial for enabling a business to manufacture products or deliver services efficiently. Investment in fixed capital facilitates production capacity and enhances operational efficiency. For example, purchasing modern machinery could lead to higher productivity and lower operational costs over time (Chaffey, 2018). However, fixed capital infusions are usually substantial investments that entail a longer payback period.

Working Capital

On the other hand, working capital helps businesses manage liquidity risks. It encompasses all the cash available for current operations, which allows businesses to cover immediate operational costs, like payroll, rent, and supplies (Wang et al., 2015). A company must maintain an adequate working capital level to ensure that it can meet its short-term financial obligations.

The Balancing Act Between Customers and Suppliers

The relationship between suppliers and customers can significantly impact working capital management. Suppliers are usually highly motivated to make sales, especially if they offer flexible payment terms. Such terms can incentivize customers to purchase more, thereby increasing sales velocity. However, if customers delay their payments beyond the agreed terms, suppliers can face working capital challenges of their own (Garrison et al., 2018).

Customers’ Perspective

From a customer perspective, extended payment terms can be advantageous. Longer payment periods provide businesses with the opportunity to allocate cash toward other operational needs without incurring interest charges that would typically accompany working capital loans (Petersen & Rajan, 1997). Businesses that can utilize the capital freed by deferred payments can invest in growth opportunities, cover emergency expenses, and smooth seasonal fluctuations (Brealey et al., 2015).
Customers may prefer suppliers who offer flexible credit terms since it allows them to use their cash reserves strategically. This strategy can be particularly beneficial for small and medium enterprises (SMEs), which often face cash flow constraints. These businesses often find themselves in a dilemma; while they appreciate the flexibility offered by suppliers, they must also ensure timely payments to mitigate negative impacts on working capital (Rao, 2016).

Suppliers’ Perspective

For suppliers, offering credit to customers can enhance sales volume but must be balanced with the risks associated with late payments. Payment delays can disrupt the supplier's cash flow and operational stability (Brealey et al., 2015). Maintaining a customer’s loyalty while also securing adequate payment terms is a balancing act that suppliers must perform.
Suppliers may implement credit assessment procedures to evaluate the creditworthiness of their customers to reduce the risk of late payments. However, being overly stringent may result in lost sales opportunities to competitors who provide more lenient credit terms (Nwogugu, 2013). Thus, suppliers often engage in negotiations to find a middle ground that supports mutual benefits without jeopardizing their cash flows.

Ethical Considerations and Biblical Perspectives

The ethical implications of capital, credit terms, and business operations cannot be overstated. The principle of fair dealing is essential for fostering long-term relationships between suppliers and customers (Matthew 7:12, 2011). As highlighted in Hebrew 13:16, businesses are encouraged to share resources and act ethically, which can lay the foundation for a productive business environment (Smith, 2015).
Trade credit, as a form of ethical business practice, serves as a short-term loan devoid of interest, functioning under the premise of an agreement to settle at a future date. Suppliers fulfill their part by delivering goods or services on time while trusting customers to honor their payment commitments. This mutual reliance creates and sustains a collaborative framework that can help businesses thrive, as the act of doing good goes beyond mere financial transactions (Lozano, 2015).

Conclusion

Capital, in its various forms, significantly influences business operations and growth potentials. The delicate balance between fixed and working capital is crucial for maintaining liquidity while ensuring operational efficiency. The relationship dynamics between suppliers and customers play a vital role in managing working capital effectively. Both parties must navigate payment terms carefully to achieve mutual benefits while adhering to ethical considerations that promote fair practices in business.
Ultimately, effective management of capital is not just about financial transactions; it embodies ethical commitments that create a more robust and collaborative business environment.

References

1. Brealey, R. A., Myers, S. C., & Allen, F. (2015). Principles of Corporate Finance. McGraw-Hill Education.
2. Cameron, A. (2016, January 15). What is Capital? A Guide for Your Small Business Accounting. Patriot Software. Available at: https://www.patriotsoftware.com/
3. Chaffey, D. (2018). Digital Business and E-Commerce Management. Pearson Education Limited.
4. Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial Accounting. McGraw-Hill Education.
5. Lozano, R. (2015). A Holistic Approach to Sustainability: The Integration of Internal and External Stakeholders. Corporate Social Responsibility and Environmental Management, 22(6), 321-335.
6. Matthew 7:12 (2011). The Holy Bible. New International Version.
7. Nwogugu, E. (2013). Business Finance and Accounting. Oxford University Press.
8. Petersen, M. A., & Rajan, R. G. (1997). Trade Credit: Theories and Evidence. Review of Financial Studies, 10(3), 661-691.
9. Rao, P. (2016). The Impact of Payment Terms on Buyers' Economic Behavior. Journal of Business Research, 69(8), 3083-3090.
10. Smith, J. (2015). Business Ethics: A Stakeholder and Issues Management Approach. Business Ethics Quarterly, 25(4), 543-552.