The Financial Consequences of Business Growth
Keywords:business growth, net working capital, temporary current assets, permanent current assets
A typical business plan for a new business focuses upon sales, expenses and profits. Can the new business produce enough sales to exceed fixed and variable expenses and make a profit. If the answer is yes, then the decision is to proceed to the next step, which is to determine the amount of initial asset investment needed to start the business and how to fnance it. There is ofen little or no focus the additional investments in assets needed to support growth in sales afer the business is begun and become successful. Failure to recognize the additional assets needed to support sales growth can come as a total surprise and, if not financed properly, can lead to financial distress, loan default and even bankruptcy.