{"id":31566,"date":"2017-05-04T16:38:29","date_gmt":"2017-05-04T08:38:29","guid":{"rendered":"https:\/\/zahiraccounting.com\/en-my\/?p=31566"},"modified":"2017-05-04T16:42:04","modified_gmt":"2017-05-04T08:42:04","slug":"how-to-calculate-the-cost-of-capital-of-your-business","status":"publish","type":"post","link":"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html","title":{"rendered":"How To Calculate The Cost Of Capital Of Your Business?"},"content":{"rendered":"

\"How<\/a><\/p>\n

Capital takes a huge role in a business’s life. However, before the capital is spent to support the newly established business, it is important to calculate the cost of capital.<\/p>\n

What is the cost of capital?<\/strong><\/p>\n

The cost of capital is the cost of funds the company uses to support and finance its operation.<\/p>\n

Generally, the cost of capital is divided into:<\/p>\n

    \n
  1. Capital expenses: an amount spent by a business to purchase goods in order to expand the company’s ability to generate profits. These purchases such as office equipment, buildings, machines, or vehicles. Most often, the capital expenses are depreciated from 5 to 10 years.<\/li>\n
  2. Operating expenses is an expense to finance a business operation. Operating expenses include inventory cost, marketing, payroll, electricity, and rent. The management has the responsibility to determine how low the operating expenses can be reduced without affecting the operational activities.<\/li>\n<\/ol>\n

    The other important point to consider is inventory. The inventory quantity is determined by referring to monthly target.<\/p>\n

    Calculating business capital<\/strong><\/p>\n

    In calculating the business capital, set the inventory based on the monthly sales prediction. Example: your grocery monthly target is IDR 20.000.000. The inventory turnover is 3 times in a month. Means, once in 10 days you need to purchase goods as your inventory. The inventory calculation will be:<\/p>\n

    Inventory IDR. 20.000.000 x (1-30%)\/2 = IDR. 7.000.000<\/p>\n

    For newly established business, the owner should provide the reserved expenses at least for the first 3, 6 or 12 months. Why the reserved expenses are required?. Commonly, the new business has not earned the determined profit target. The reserved expenses are allocated to support the business activity in its first year.<\/p>\n

    Here is the example of capital expenses and operational expenses.<\/p>\n

    For instance, the clothing business owner opens his online store.<\/p>\n

    Capital\u00a0 <\/b><\/b>Expenses:<\/b><\/p>\n

    \u2013 Store Website \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0 IDR. 2.000.000<\/p>\n

    \u2013 1 computer\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 IDR. 3.000.000<\/p>\n

    \u2013 1 modem \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 IDR. \u00a0\u00a0\u00a0350.000<\/p>\n

    \u2013 1 mobile phone \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 IDR. 1.000.000<\/p>\n

    \u2013 Clothes inventory \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 IDR. 7.000.000<\/p>\n

    Total Capital expenses \u00a0\u00a0\u00a0 <\/b>IDR.11.350.000<\/b><\/p>\n

     <\/p>\n

    Operational Expenses<\/b><\/p>\n

    \u2013 Office and warehouse monthly rent: \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 IDR. 1.500.000<\/p>\n

    \u2013 The salary for 3 employees @ IDR. 1.000.000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 IDR. 3.000.000<\/p>\n

    \u2013 Electricity charges \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 IDR. \u00a0\u00a0\u00a0300.000<\/p>\n

    \u2013 Internet charges \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 IDR. \u00a0\u00a0400.000<\/p>\n

    \u2013 Pulse charges \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 IDR. \u00a0\u00a0\u00a0250.000<\/p>\n

    Total Operational Expenses \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 IDR. 5.450.000<\/b><\/p>\n

     <\/p>\n

    To calculate your reserved expenses for the first 3 months: IDR. 5.450.000 x 3 = IDR. 16.350.000. The total business capital to open your online clothing store is:<\/p>\n

    Capital Expenses + Operational Expenses <\/b><\/p>\n

    IDR. 11.350.000 \u00a0\u00a0\u00a0\u00a0\u00a0+ \u00a0\u00a0\u00a0IDR. 16.350.000 <\/b><\/p>\n

    = IDR. 27.700.000<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"

    Capital takes a huge role in a business’s life. However, before the capital is spent to support the newly established […]<\/p>\n","protected":false},"author":11,"featured_media":31588,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[35,9],"tags":[],"yoast_head":"\nHow to Calculate the Cost of Capital of your Business? | Zahir Accounting<\/title>\n<meta name=\"description\" content=\"Before the capital is spent to support the newly established business, it is important to calculate the cost of capital. See full article here.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How to Calculate the Cost of Capital of your Business? | Zahir Accounting\" \/>\n<meta property=\"og:description\" content=\"Before the capital is spent to support the newly established business, it is important to calculate the cost of capital. See full article here.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html\" \/>\n<meta property=\"og:site_name\" content=\"Best Accounting Software in Malaysia | Zahir\" \/>\n<meta property=\"article:published_time\" content=\"2017-05-04T08:38:29+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2017-05-04T08:42:04+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/zahiraccounting.com\/en-my\/wp-content\/uploads\/2017\/05\/How-To-Calculate-The-Cost-Of-Capital-1080x1080-01.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1080\" \/>\n\t<meta property=\"og:image:height\" content=\"1080\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Sri Warni\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"https:\/\/zahiraccounting.com\/en-my\/#website\",\"url\":\"https:\/\/zahiraccounting.com\/en-my\/\",\"name\":\"Best Accounting Software in Malaysia | Zahir\",\"description\":\"The Best Accounting Software\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/zahiraccounting.com\/en-my\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"ImageObject\",\"@id\":\"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html#primaryimage\",\"inLanguage\":\"en-US\",\"url\":\"https:\/\/zahiraccounting.com\/en-my\/wp-content\/uploads\/2017\/05\/How-To-Calculate-The-Cost-Of-Capital-1080x1080-01.png\",\"contentUrl\":\"https:\/\/zahiraccounting.com\/en-my\/wp-content\/uploads\/2017\/05\/How-To-Calculate-The-Cost-Of-Capital-1080x1080-01.png\",\"width\":1080,\"height\":1080,\"caption\":\"How To Calculate The Cost Of Capital\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html#webpage\",\"url\":\"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html\",\"name\":\"How to Calculate the Cost of Capital of your Business? | Zahir Accounting\",\"isPartOf\":{\"@id\":\"https:\/\/zahiraccounting.com\/en-my\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html#primaryimage\"},\"datePublished\":\"2017-05-04T08:38:29+00:00\",\"dateModified\":\"2017-05-04T08:42:04+00:00\",\"author\":{\"@id\":\"https:\/\/zahiraccounting.com\/en-my\/#\/schema\/person\/8e37c545fd63450fd5a39dd664cf2dd7\"},\"description\":\"Before the capital is spent to support the newly established business, it is important to calculate the cost of capital. See full article here.\",\"breadcrumb\":{\"@id\":\"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/zahiraccounting.com\/en-my\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"How To Calculate The Cost Of Capital Of Your Business?\"}]},{\"@type\":\"Person\",\"@id\":\"https:\/\/zahiraccounting.com\/en-my\/#\/schema\/person\/8e37c545fd63450fd5a39dd664cf2dd7\",\"name\":\"Sri Warni\",\"image\":{\"@type\":\"ImageObject\",\"@id\":\"https:\/\/zahiraccounting.com\/en-my\/#personlogo\",\"inLanguage\":\"en-US\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/9e3578c46b00cdae62128ee312ec7c5c?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/9e3578c46b00cdae62128ee312ec7c5c?s=96&d=mm&r=g\",\"caption\":\"Sri Warni\"},\"url\":\"https:\/\/zahiraccounting.com\/en-my\/author\/iien\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"How to Calculate the Cost of Capital of your Business? | Zahir Accounting","description":"Before the capital is spent to support the newly established business, it is important to calculate the cost of capital. See full article here.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html","og_locale":"en_US","og_type":"article","og_title":"How to Calculate the Cost of Capital of your Business? | Zahir Accounting","og_description":"Before the capital is spent to support the newly established business, it is important to calculate the cost of capital. See full article here.","og_url":"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html","og_site_name":"Best Accounting Software in Malaysia | Zahir","article_published_time":"2017-05-04T08:38:29+00:00","article_modified_time":"2017-05-04T08:42:04+00:00","og_image":[{"width":1080,"height":1080,"url":"https:\/\/zahiraccounting.com\/en-my\/wp-content\/uploads\/2017\/05\/How-To-Calculate-The-Cost-Of-Capital-1080x1080-01.png","type":"image\/png"}],"twitter_card":"summary","twitter_misc":{"Written by":"Sri Warni","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebSite","@id":"https:\/\/zahiraccounting.com\/en-my\/#website","url":"https:\/\/zahiraccounting.com\/en-my\/","name":"Best Accounting Software in Malaysia | Zahir","description":"The Best Accounting Software","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/zahiraccounting.com\/en-my\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"ImageObject","@id":"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html#primaryimage","inLanguage":"en-US","url":"https:\/\/zahiraccounting.com\/en-my\/wp-content\/uploads\/2017\/05\/How-To-Calculate-The-Cost-Of-Capital-1080x1080-01.png","contentUrl":"https:\/\/zahiraccounting.com\/en-my\/wp-content\/uploads\/2017\/05\/How-To-Calculate-The-Cost-Of-Capital-1080x1080-01.png","width":1080,"height":1080,"caption":"How To Calculate The Cost Of Capital"},{"@type":"WebPage","@id":"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html#webpage","url":"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html","name":"How to Calculate the Cost of Capital of your Business? | Zahir Accounting","isPartOf":{"@id":"https:\/\/zahiraccounting.com\/en-my\/#website"},"primaryImageOfPage":{"@id":"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html#primaryimage"},"datePublished":"2017-05-04T08:38:29+00:00","dateModified":"2017-05-04T08:42:04+00:00","author":{"@id":"https:\/\/zahiraccounting.com\/en-my\/#\/schema\/person\/8e37c545fd63450fd5a39dd664cf2dd7"},"description":"Before the capital is spent to support the newly established business, it is important to calculate the cost of capital. See full article here.","breadcrumb":{"@id":"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/zahiraccounting.com\/en-my\/31566-how-to-calculate-the-cost-of-capital-of-your-business.html#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/zahiraccounting.com\/en-my\/"},{"@type":"ListItem","position":2,"name":"How To Calculate The Cost Of Capital Of Your Business?"}]},{"@type":"Person","@id":"https:\/\/zahiraccounting.com\/en-my\/#\/schema\/person\/8e37c545fd63450fd5a39dd664cf2dd7","name":"Sri Warni","image":{"@type":"ImageObject","@id":"https:\/\/zahiraccounting.com\/en-my\/#personlogo","inLanguage":"en-US","url":"https:\/\/secure.gravatar.com\/avatar\/9e3578c46b00cdae62128ee312ec7c5c?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/9e3578c46b00cdae62128ee312ec7c5c?s=96&d=mm&r=g","caption":"Sri Warni"},"url":"https:\/\/zahiraccounting.com\/en-my\/author\/iien"}]}},"_links":{"self":[{"href":"https:\/\/zahiraccounting.com\/en-my\/wp-json\/wp\/v2\/posts\/31566"}],"collection":[{"href":"https:\/\/zahiraccounting.com\/en-my\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zahiraccounting.com\/en-my\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zahiraccounting.com\/en-my\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/zahiraccounting.com\/en-my\/wp-json\/wp\/v2\/comments?post=31566"}],"version-history":[{"count":6,"href":"https:\/\/zahiraccounting.com\/en-my\/wp-json\/wp\/v2\/posts\/31566\/revisions"}],"predecessor-version":[{"id":31593,"href":"https:\/\/zahiraccounting.com\/en-my\/wp-json\/wp\/v2\/posts\/31566\/revisions\/31593"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zahiraccounting.com\/en-my\/wp-json\/wp\/v2\/media\/31588"}],"wp:attachment":[{"href":"https:\/\/zahiraccounting.com\/en-my\/wp-json\/wp\/v2\/media?parent=31566"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zahiraccounting.com\/en-my\/wp-json\/wp\/v2\/categories?post=31566"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zahiraccounting.com\/en-my\/wp-json\/wp\/v2\/tags?post=31566"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}