Capital Management
Concepts and Importance

Capital Management in Saudi Arabia occupies a center place in construction companies beside materials, labors, equipments and sub-contractors for their direct contribution to the success and continuity of the Sewer Contractor business.

On the contrary, poor capital management is harmful, because the damage may extend to loss the whole capital or most of it. The manager that works without managing his capital in a proper way gives up one of the most important conditions of success.

Note: Always put in your mind the contractor funding matter. You should search for different funding resources and keep them on call, to arrange the necessary money at any time.

Capital Definition:
Is an economic term that means funds, materials and tools needed to create a business that aims to make a profit. We can also define it as the amount of money paid to the entity by the owners or any other parties. This money is paid in the form of cash or non cash, during setting up the company or for the capital increase.

Although the capital appears in the liabilities side of the balance sheet, it should not be considered as a debt or loan for the entity. In fact, the amount paid by the owners or shareholders, is for investment and producing profit.

If we search for the physical presence of capital, we will not find it in the form of frozen funds in the company cash account or as a deposit in the bank account, but in the form of assets and particularly as a fixed asset.

The capital is considered one factor of production. It shares with other elements in achieving the production in a degree that makes it the center of the economic development. Furthermore, it occupies a prominent place in the economic theory of production and distribution, and in the theory of economic growth at the same time.

Capital types:
1) The Circulating Capital: It is the money which its economic usefulness ends by using it once or for a few times. Its entire value is calculated in the cost of the produced items, such as raw cotton, that is used in the textile industry for one time.

2) The Working Capital : It is the entity net liquid resources in the market (working capital = current assets - current liabilities).

3) The Social capital: It means the public utilities, infrastructure projects, institutions of order, institution of security and justice, which are considered the community assets.

4) The Intangible Capital: It means a goodwill or manufacture or brand, which guarantees to achieve a high number of sales. The accountants used to set a monetary value for the goodwill among other asset's elements as it is considered an intangible asset.

5) Securities and Bonds: It is considered as a contribution to the capital. That produces returns in the form of a dividend for each share and a specific interest added on the principal value of the bond at the maturity date.

Financial Ratios:
Getting to know the financial ratios will give you a clear indication about your business. These ratios are widely used by financial experts to help the top management to take various decisions, such as investing in a new companies, etc.

- Working Capital Ratio.
- Cost of Capital.
- Cost of Equity.
- Return On Investment.
- Weighted Average Cost Of Capital.

Business Competence - Find more info about business & capital management.
Return from Capital Management Page to Sewer Contractor Management Guide Page