Contribution
What does it mean
A contribution is term referring to the amount of money put into a business by it's owners.
Why does it matter
Monitoring the amount of contributions is important for a variety of reasons:
- Why was it needed - Understanding the underlying reason the contribution was needed is important. Was it needed because the business is losing money or because it is rapidly growing?
- Does it impact ownership of the business - Understanding the impact contributions may have on the ownership of the business is relevant. This is especially important if there is a reason some owners either can’t or won’t inject their share of any required contribution, and if they can't/won't, what is the ownership afterwards
- Where did the cash come from - Understanding the source of the cash is important as well. Did the owner inject this cash from existing cash reserves (reduced liquidity) or by borrowing it someplace else (reduced repayment ability)
Other Relevant Terms
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