SEC-S20W2 | My Business Ideas |Capital Management

When it comes to starting up your business a lot of things must be put in place to get your business running smoothly in accordance to the rules and regulations of the country, state, or the environment in which you want your business to be located. Doing all these requires money and stress, but what is more interesting is managing your investment capital and doing the right things.

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Q1. Please tell us about your initial investment value in terms of Steem as well as in US$, and how you manage it.

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Due to the type of business that I have planned to start and how I want to start running the business, my initial investment capital is ₦65,200,000 which in USD is $40,000 whereas in Steem is valued at 238,214.085 STEEM. In my country, Nigeria things are now so expensive which is the reason why I will need such an amount of money to pay for the following under-listed

• Inventory
• Supplies
• Equipment
• Property
• Licence
• Approval etc

I will use the money to cover the operating expenses of the business for the first month which is why such an amount of money is needed.

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Q2. A profit and loss statement is commonly known as a statement that shows details of your business's revenue and expenses over a period that we calculate on a monthly, quarterly, or annual basis. How do you determine whether your business made a profit or loss during a stipulated period?

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For me to determine whether my business is a profit or loss during a stipulated period using a "Profit and Loss Statement" which in IFRS is called "Income Statement", I will follow the given steps below.

• Calculate Total Revenue:
  Total revenue includes all incomes generated from sales, services, or other operations of the business during the stipulated period.

• Determine Total Expenses:
  In doing this, I will list out all operating expenses such as; salaries, cost of goods sold, rent, taxes, and any other expenses (costs) that are associated with running the business at the stipulated period.

• Subtract Total Revenue from Total Expenses:
  By doing this I will get to know how much profit I made and how much I spent in total during the stipulated period. To this.

Profit: This is when my total revenue is greater (higher) than my total expenses, if so then I have made a profit which I will reinvent 80% of the profits back into the business for expansion and growth.

Loss: This is when my total expenses are greater (higher) than my total revenue, if so then I have incurred a loss I will need to adjust my spending habits and be more engaged in the business to avoid making losses again.

Business is for profit making, and not for loss, which the above results are what I will do to get a clear financial performance of my business during a stipulated period which is going to be annual basis.

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Q3. Loans and working capital
Did you take any loans or working capital for your business from any financial institute?

Well, I haven't started the business that I am planning to start, but should in case I want to start I will take a loan from a financial institution to kick-start the business. Taking a loan is all about one going into agreement with the loan provider on how the loan would be paid back with interest and the terms and conditions that are attached to the loan if the receiver agrees to the provider's terms and conditions then the loan would be giving to him or her.

Firstly, if I am to take a loan I will provide a valuable asset as collateral for the loan should in case I find myself not able to repay the loan as promised (agreed). But in a situation where I am capable of paying the loan, I will be making my payment monthly with the interest that is attached to the loan. One thing about loan payment is that the more you delay your payment the more your interest rate would keep increasing which I wouldn't like to incur additional interest.

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Q4. Collateral securities and your understanding

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Collateral securities are property or assets that a borrower offers to a lender as a guarantee for a loan. This can be risky as if you are unable to pay your loan whatever you give as a collateral security would be taken away (seize) by the lender.

Collateral can include the following aforementioned assets;

• Vehicles (machinery, trucks, cars)
• Real estate (commercial properties, land, home)
• Cash account or savings
• Inventory
• Stock bonds etc

Having mentioned the asset used for collateral if I am to collect a loan from a financial institution, I will give out the asset that I know I can get back easily as collateral for the loan I am to collect. With the collateral that I will provide, I have provided the financial institution (lender) with confidence that I will surely pay back my loan which reduces the risk of lending money to me. However, I hate borrowing money so I wouldn't be declared bankrupt.

I am inviting: @pelon53, @simonnwigwe, and @ruthjoe