Financial Forecasting

It is, therefore, necessary for a new concern to estimate its requirements of funds properly. The financial requirements of a new company may be outlined under the following heads:

1. Cost of fixed assets including land and buildings, plant and machinery, furniture, etc. The amount invested in these items is called fixed capital.

2. Cost of current assets including cash, stock of goods (also called inventory of merchandise), book debts, bills, etc. 

3. Cost of promotion including the expenses on preliminary investigation, accounting, marketing and legal advice, etc. 

4. Cost of setting up the organisation.

5. Cost of establishing the business, i.e., the operating losses which have generally to be sustained in the initial periods of a company. 

6. Cost of financing including brokerage on securities, commission on underwriting, etc. 

7. Cost of intangible assets like goodwill, patents, etc.

Of the various items of financial requirements listed above, the first two deserve special consideration, as the successes of any concern will depend largely on them.