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Counter-Trade

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Submitted By mehmet1914
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Entrepreneurial skills

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Finance for entrepreneurs

There are two classical ways to finance business

you put money in your business out of your pocket, and there has to be a share of there own money that is called owner equity genereric for funding business, you have to borrow.

The exray of the business a reflected on two documents

balance sheet income table

Balancesheet vs. Financing needs

Balance sheet is a table, with two sides, with two colums, on the left you have the assets, and at the other side you have the liablility ( this is the money you borrow from others), and as well owner equity (this is the money you put in your business out of your pocket).

Assets fall into two main categories, you have current assets and fixed assets.
Fixed assets, are land, building, machinery, eguipments, vehicles, fax machines etc. If you are a manufacturer, you need to buy alot of equipments, but if you are a trader buy and sell, you may not need alot of items. At least some items should be in the fixed assets.

How do you finance them

You may wish to buy a place where you do business or you can simply rent it, and you need to put machinery in the office. For this you need money. Not all does come out of your pockets, financing needs are even for the richest corporations. In each business there are ownersmoney, or the money that the entrepreneur had borrowed.

The golden rule: debt to equity should bet two times. The total debt and owners equity. The total debt has to be maximum two and the owerers equity has to be 1. If the total debts are twice as much as the owners equity, that business regarded as an optimum business.

Debt to equity should be 2/1 = 200% , two times. If you have this on your report, the bank will welcome you.

If the owner- equity is higher, you don’t have the credit worthness, but

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