Please help me to solve this Your first financial decision is to determine how m
ID: 388698 • Letter: P
Question
Please help me to solve this
Your first financial decision is to determine how much money it will take to open the doors. You may find that the amount is reasonable or too high. Sometimes the amount seems reasonable and obtainable, but you decide that the potential profit isn't worth the work. Startup costs need to be estimated then operating expense, and revenue streams need to be determined. Differentiate Start-up Costs From Operating Expenses Start-up Costs are one-time costs of Assets that usually won't recur for at least one year, likely longer or sometimes never: Remodeling - 1 year Equipment - e.g. computer, 3 years Truck 5 years Building - 20 years Operating Expenses are uses of some part of your Assets that recur predictably, usually measured on a monthly basis. Rent Utilities Advertising Salaries and wages CGS (Cost of Goods Sold) Etc. Why estimate start-up costs? Determine total dollar amount needed to start your business Determine appropriate type of financing Assess risk, feasibility, and personal investment Have better information to help make decisions
Explanation / Answer
The startup cost estimation is good because it gives the amounts that would be needed to start any business. Expenditure can be determined well in advance and preparation for finance would be done in advance.
Total cost for starting up the business would need around 1, 38, 000 Us dollars that would include setting up basic infrastructure to operate, licensing cost and buying necessary machines and system like computer, designing office and other facilities to work with.
Financing asses risk would come out of loss if it occurs and in that event certain amounts has to be reserved for bailing out the debt.
Loans, angel investors etc. would be approached for financing and personal investments would be poured in to make the business run.