Page 55 - IMDR MSME BOOK 2021

Managing Finance in Micro, Small & Medium Enterprises
The above results establish there is a need of awareness
among the MSME business owners or their nance and
accounting staff about the usefulness of preparing the
actual and forecasted Cash Flow statement and review
and comparison of the same. The situation is more
worrisome for the 9% respondents who never prepared
the Cash Flow Statements.
Cost of Capital
Securing capital is not an easy task in today’s time. With
the start-up culture growing in the country and
encouragement provided to youth to become job creators
rather than job seekers, results in generation of new
ideas and willingness to act upon it to commercialize it
for monetary gains.
Many dreams remain unfullled due to lack of capital
and many good ideas do not get executed. In such cases if
one doesn’t use the available capital in the most prudent
manner, it is injustice to the whole system.
Like the value of any asset is mapped with the price paid
for it, similarly capital needs to be appreciated for the
price paid for using it. Here an analogy may be drawn
between any xed asset and capital. If one takes any
asset on lease, he pays rent or lease charges on it,
similarly capital can be treated as the monetary asset
taken on lease, for which rent is to be paid in form of
interest or prot.
To judiciously use the capital, it is important to
understand the cost paid to acquire it. As the name
suggests, the Cost of Capital is the sacrice made for
investing capital into any venture. The cost of nancing a
business is its Cost of Capital. Here, capital may mean
Equity or Debt or Both. Generally, businesses have a
capital structure consisting of both Debt and Equity.
Debt means funding in the form of loan and Equity