Initial outlay

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Initial outlay

When running a business, you may come across opportunities to make investments and increase profits for your company. Before getting involved in an investment, you have to look at the initial outlay to determine how much money you will be investing, so you can decide whether it is worth the trouble. Calculating the initial outlay is not difficult, and can provide you with valuable information that will help you make the proper decision for your business. Add up the explicit initial outlay, or costs, of the project. These are items that are specifically related to the investment or expansion project. For example, if you are adding a piece of factory equipment that will help you produce a new line of products, the cost of the equipment is part of the explicit initial outlay. Add in any shipping costs, taxes, fees and installation costs for the investment. Calculate any changes in working capital for your business as a result of this project. For instance, you may need to account for increases or decreases in accounts receivable as a result of undertaking this project. You may need to buy more or less inventory, depending on the project. You may also need a certain amount of cash on hand.

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Launching a new business project is an investment, but it can be a risky one. Two big questions you have to ask are whether you can afford the initial investment outlay and whether the return will be worth it. Fortunately, there are formulas to help you figure it out. To calculate the initial investment outlay, take the cost of new equipment for the project plus operating expenses such as supplies. Subtract the value of any old equipment you sell off, then add any capital gains tax or loss you make on the sale. That gives you your outlay. Suppose you run a toy-manufacturing company. Your manufacturing equipment is too old and slow to keep up with demand so you want to replace it, but wonder if the initial outlay finance decision will pay off.

Initial outlay

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Initial cash flow is factored into the discounted cash flow analysis that is used to evaluate the feasibility of a project. Partner Links. Check See the answer Next Next quiz Review. Traditional Chinese. Collins Word of the Day. This could for the global economy. Trending Videos. There may be no additional equipment costs since the kitchen is adequate for the expanded service. Quiz German confusables. Cancel Submit.

Initial investment is the amount required to start a business or a project.

Avoiding common mistakes with verb patterns 2. English—Norwegian Norwegian—English. Bilingual Dictionaries. In some cases, the total may be offset by the salvage value. Click on the links below to explore the meanings. And that reduces the business cash flow, not just initially but long term. Cancel Submit Thanks! The trial may take more than a year to. English to Traditional. English confusables. In addition to writing informative articles, he published a book, "Modern Day Parables," in English Dictionary. Calculate any changes in working capital for your business as a result of this project. An investor who is considering bankrolling a new venture will conduct a similar analysis to help decide whether it's worth the investment.