Financial Requirement - Management Science II...

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Management Science II Dr.T.J.Kamalanabhan Indian Institute of Technology Madras MODULE 7 Financial Requirement Financial Requirement Initial Investment Requirement Subsequent Cost Requirement Contingency Requirement Initial Investment Requirement Capital requirement for equipment and structures necessary to start the business Working capital financial requirements in the form of raw materials, related supplies and people before a sale is made Working Capital Financial Requirement Recruiting a management team Preparing product specifications Preparing product prototype design Product testing Initial Production costs Initial Marketing costs Initial Administrative costs Subsequent Cost Requirement Working capital cycle of the business 1
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Management Science II Dr.T.J.Kamalanabhan Indian Institute of Technology Madras Revenue inflow of the business Matching of revenue inflow to cost requirement Excess funding required Contingency Requirement Contingent factors that are likely to affect the business The cost related to these contingent factors Ownership Pattern Equity Holding Debt Structure Venture Capital Equity Holding Percentage of Equity contribution in the total financial requirement Extent of long term control of business Possible equity allocation to employees of the business Basis For Arriving At The Sources Of Finance Forecasts for every quarter for the forthcoming year Forecasts for a five year duration Forecast Statements Used For Deciding The Sources Of Finance Sales Production 2
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Dr.T.J.Kamalanabhan Indian Institute of Technology Madras Remuneration Accounts Receivable, Accounts Payable Overhead Expenses Capital Expenditures and Depreciation Start-up costs, fixtures, equipment, etc Explanations Appended To Forecast Statements Assumptions made for forecasting the above for a five year duration Deviation of forecasts from industry average Debt Structure Financial Institutions Private Known Sources Business houses such as suppliers and Schemes Of Refinance Assistance Project Finance Scheme For setting up new units; preference given to units with export orientation, import substitution, hi-tech and those promoted by entrepreneurs with a good track record. Modernization, technology up gradation, diversification and expansion of existing well run units. For setting up of hotels and other tourism related activities as well as hospitals & nursing homes. 3
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This note was uploaded on 03/04/2011 for the course HR 303 taught by Professor Sanghamitra during the Fall '05 term at Indian Institute of Technology, Chennai.

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Financial Requirement - Management Science II...

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