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Capital Term

Essay by   •  March 10, 2013  •  Essay  •  540 Words (3 Pages)  •  782 Views

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Capital is an extremely vague term and its specific definition depends on the context in which it is used. In general, it refers to financial resources available for use. It is also a financial assets or the financial value of assets, such as cash. Estimating and matching expenses to revenue (real or anticipated) is important because it helps small business owners to determine whether they have enough money to fund operations, expand the business and generate income for themselves.

In budgeting for a new business, you have to purchase that are a must have to give your business a better chance of success. Capital budget includes planned outlays for capital assets with long expected lives and which are designed to produce income or support operations. These usually exceed cost minimums as dictated by accounting and/or tax rules, and include land, buildings, machinery, office equipment, furniture and fixtures, and vehicles.

Most of these items are consider operating budgets. An operating budget is a short-term budget, capital outlays are excluded because they are long-term costs. They are also consider capital assets. Capital Assets are all types of property that are held by a company for investment and useful purposes. All of these items help the business to create income for them. No matter how much or how little you have to invest, you want to keep careful track of how you are doing. Calculating the return on your portfolio and comparing it to the average market returns is one of the best ways to stay on track and ensure that your investments are working as hard as you do. Once you know how your investments are faring, you can make any necessary adjustments to make them do even better.

A crucial element of investing is managing how much tax you will owe on your gains. Taxes are sometimes overlooked or considered after the fact, but capital gains (depending on the security type and holding period) can have a big impact on investment results. Different types of capital gains are taxed at different rates. This needs to be taken into account when making investing decisions. The following is a quick guide to the different types of capital gains, and what needs to be taken into consideration when making future investment decisions. Short-term and long-term gains and losses factor in here as well. When offsetting capital gains with losses, investors must first offset any long-term gains with long-term losses, before offsetting any short-term gains.

Capital expenses are purchases of or investments in long-term assets, such as facilities, equipment, and research and development. The financing of these items occurs over more than one year. Capital expenditure budgeting is the process of maintaining a separate budget for these assets and, often, a separate approval process. The length of time involved and the size of the investment in long-term assets often means that capital expenditure budgeting has two approval

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