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Capital Estimation Simplified: LMKs Method Step 6

Learn how to calculate the capital needed for your business with a simplified approach. Estimate cash, accounts receivables, product stock, and fixed investments. Create a budgeted balance, compare with results, and budget ROI. Ensure financial security while supporting company valuation. Sleep soundly knowing you are on the right track.

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Capital Estimation Simplified: LMKs Method Step 6

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  1. The need for capital, Step 6 • Having planned for a profit and loss statement, we know nothing yet about our real need for capital to enable this business. • We will estimate this need in a simplified way, where prime items are need for cash, accounts receivables, product stock and fixed investments. LMKs method Step6 Capital needed

  2. Calculate capital needed LMKs method Step6 Capital needed

  3. Balance used to calculate capital needed • We make up a budgeted balance for each year, enabling us to compare with results obtained • We estimate nessecary cash on hand to be equal to one months payments, not to be unduly worried, loosing the nights sleep • Estimating the other figures we use key numbers abtained from accounting statistics and practise LMKs method Step6 Capital needed

  4. LMKs method Step6 Capital needed

  5. Comparing capital need with profit (before tax) • We are now in a postion to budget ROI • For a fail-safe plan as ours, it looks good • Does it also support a valuation of the company in excess of capital needed ?? LMKs method Step6 Capital needed

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