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Are you interested in starting a business but confused about how to calculate business capital? Let’s see below how to calculate your trading capital!

The first thing to consider when starting a business is capital. This capital can be defined as a business investment that is issued initially, and is used in the long run for business development.

This business capital account can be one of the jobs which is not easy as it requires knowledge of accounting and finance.

**What is business capital?**

In simple terms, business capital is all that is used for the operational processes of a business.

The form can be in the form of money, matter or energy. Capital in the form of material can be used to finance businesses including obtaining permits and purchasing assets and raw materials.

Meanwhile, energy capital refers to a person’s ability to run a business.

However, capital is not only limited to all things material in nature but also intangible capital.

A simple example, if you have a food business, of course you have to master how to make and process it and how to market the products and provide the best service.

#### (Also Read: 6 Reasons a Business Needs Loan Capital, Business Expansion is One of them!)

**How to calculate business capital**

To calculate the estimated speculation with investment capital and find out the profit later, you need to calculate the capital.

For those who are still confused about how to calculate business capital, here are different ways to calculate business capital according to the type of capital itself.

**1. Capital to buy assets**

The first method of calculating business capital is to calculate capital for purchase of goods or investment capital.

Capital This is the capital allocated to equipment that will be used in the long term.

For example, for those of you who have businesses like mixers, stoves, ovens and other cooking supplies.

The formula used to calculate this type of capital is:

**Investment capital = product price + product price**

**2. Commodity capital**

Working capital or commodity capital is a form of cost assigned to purchase basic materials, which will later be processed into business products.

Thus, this capital will be replenished in each production period. For example for food business like flour, rice, spices and other raw materials.

This method of calculating capital is:

**Working capital = (product price + product price) x total output**

**3. Monthly working capital**

Working capital is a type of capital that uses allotted funds to pay for the production process.

For example, workers’ salaries, electricity costs, workers’ housing, and others. This method of calculating capital is:

**Working capital = cost of expenses for one production period**

**4. Initial capital**

There are many formulas that can be used to calculate the initial capital. The simplest formula is to combine investment capital + working capital + operating capital.

In addition, some of the formulas for calculating the initial capital are as follows:

**Starting Capital = Final Capital – (Profit + Prive)****Initial Capital = Closing Capital – (Income + Expenses + Taxes + Privacy)****Conditional First = Quick Capital + Operating Expenses**

Some of the interpretations of the components used in the initial capital account formula above are:

- Prive: Withdrawal of a certain amount of money by the employer
- Expenses: Expenses used for company needs such as vehicle repairs, electricity bills and employee salaries.
- Capital Expenditures: The costs used to purchase goods with a long life.
- Operating expenses: the expenses of purchasing goods that must be replenished within a certain period of time

**5. Final capital**

Final capital is the amount of money a business entity has after going through production, losses, and other expenses.

This means that the final capital is the initial capital to which profits and privileges are added or subtracted. The formula that can be used to calculate the terminal capital is as follows:

**End of Capital = Starting Capital + (Profit/Loss + (- Special))**

**How do you calculate the profit?**

After calculating the cost of business capital, in the business world of course you also have to calculate profits.

Profit is also known as profit, which is the difference between the total value of sales and production costs. Because what is calculated is the difference, the profit value can be positive or negative.

Profit will be said to be profitable if the calculation of this difference is positive, which means profit.

But for profit and loss, if the account of this difference is negative. As it will be said that the firm or production agency is at a loss if production costs are greater than total sales.

Therefore, profit calculation is very important to know the financial position of the company. There are two types of old to count, namely gross profit and net profit.

**Gross profit**

Gross profit or otherwise known as Gross Profit is the total sales value of products minus the cost of goods.

Where the production cost representing the discount factor is the material cost of making the product excluding taxes and interest.

How to calculate the gross profit can be done using the formula:

**Gross Profit = Total Revenue – Cost of Goods Sold**

**Net profit**

Net profit or often referred to as net profit is the value of all sales minus cost of goods sold, taxes, interest and all expenses.

To calculate net income, you can use the following simple formula:

**Net Profit = Total Revenue – (Cost of Sales + Operating Expenses)****Net Profit = Gross Profit – All Operating Expenses**

#### (Also read: 6 Ways for a Rising Business to Make Your Business More Popular!)

So, this is complete business capital information of how to calculate business capital and profits that can be useful for those of you who have plans to start a business.

If you already have enough capital to open a business, you can use the above formula to make it easier to calculate business capital.

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