OTE2601 Portfolio solutions 2025
OTE2601 — Financial Management Portfolio
solutions 2025
Module: Orientation to Teaching Economic and Management
Sciences (OTE2601)
Due date: 10 October 2025
Oct/Nov 2025
ORIENTATION TO TEACHING ECONOMIC AND
MANAGEMENT SCIENCES
100 marks
, 1. Estimation of capital requirements
1.1 What this function is (explanation)
Estimation of capital requirements is the process of identifying and quantifying all the
funds a business will need to (a) start operations and (b) run day-to-day activity until it
reaches a sustainable cash-generating level. This includes start-up (one-time) costs
(equipment, premises fit-out, licences), initial working capital (inventory, receivables,
petty cash), and a contingency buffer for unexpected shortfalls. Accurately estimating
these needs is the first step in sensible financial planning and underpins fundraising,
pricing and risk management. (See standard capital-budgeting and start-up guidance.)
Investopedia+1
1.2 How I would apply it in a startup (practical steps)
1. List all start-up items (assets, fees, legal, IT, initial stock).
2. Forecast operating cash flows for the first 12–24 months (sales forecasts by
month, cost of goods sold, fixed costs).
3. Calculate working capital needs using the formula:
Working capital requirement = (Average inventory days × daily COGS) + (Average
receivable days × daily sales) − (Average payable days × daily purchases).
4. Add contingency (typically 10–20% depending on industry risk).
5. Aggregate one-time capital + working capital + contingency = total capital
requirement. Use a monthly cash-flow forecast to determine the timing of
funding needs. The U.S. SBA and practical startup guides recommend a line-by-
line approach and scenario testing (best / base / worst). Small Business
Administration+1
1.3 Impact and why it is crucial
Without a realistic estimate the startup risks under-capitalisation (running out of cash),
over-capitalisation (tying up too much capital in low-return assets), poor negotiation
with funders, and inability to scale. Good estimates enable: credible funding requests,
appropriate choice of funding instruments, and stress-testing of survival under revenue
shortfalls.
OTE2601 — Financial Management Portfolio
solutions 2025
Module: Orientation to Teaching Economic and Management
Sciences (OTE2601)
Due date: 10 October 2025
Oct/Nov 2025
ORIENTATION TO TEACHING ECONOMIC AND
MANAGEMENT SCIENCES
100 marks
, 1. Estimation of capital requirements
1.1 What this function is (explanation)
Estimation of capital requirements is the process of identifying and quantifying all the
funds a business will need to (a) start operations and (b) run day-to-day activity until it
reaches a sustainable cash-generating level. This includes start-up (one-time) costs
(equipment, premises fit-out, licences), initial working capital (inventory, receivables,
petty cash), and a contingency buffer for unexpected shortfalls. Accurately estimating
these needs is the first step in sensible financial planning and underpins fundraising,
pricing and risk management. (See standard capital-budgeting and start-up guidance.)
Investopedia+1
1.2 How I would apply it in a startup (practical steps)
1. List all start-up items (assets, fees, legal, IT, initial stock).
2. Forecast operating cash flows for the first 12–24 months (sales forecasts by
month, cost of goods sold, fixed costs).
3. Calculate working capital needs using the formula:
Working capital requirement = (Average inventory days × daily COGS) + (Average
receivable days × daily sales) − (Average payable days × daily purchases).
4. Add contingency (typically 10–20% depending on industry risk).
5. Aggregate one-time capital + working capital + contingency = total capital
requirement. Use a monthly cash-flow forecast to determine the timing of
funding needs. The U.S. SBA and practical startup guides recommend a line-by-
line approach and scenario testing (best / base / worst). Small Business
Administration+1
1.3 Impact and why it is crucial
Without a realistic estimate the startup risks under-capitalisation (running out of cash),
over-capitalisation (tying up too much capital in low-return assets), poor negotiation
with funders, and inability to scale. Good estimates enable: credible funding requests,
appropriate choice of funding instruments, and stress-testing of survival under revenue
shortfalls.
