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Chapter 1 Business Finance

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47 views

Chapter 1 Business Finance

Uploaded by

Akash Patil
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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BUSINESS FINANCE

Meaning of Business Finance


Business finance refers to capital and credit funds invested in the
business. Financing means making available when it’s needed. Business finance
may be defined as planning,raising,managing and controlling all the money
used or capital funds of any kind used in connection with business
Definitions:
“Finance is that business activity which is concerned with the acquisition
and conservation of capital funds in meeting the financial needs and overall
objectives of business enterprise”. -B.O Wheeler.
“Business finance involves a set of administrative functions in an
organization which relate with the arrangement of cash and credit so that the
organization may have the means to carry out its objectives as satisfactory as
possible”. - Howard and Upton
“Business Finance can be broadly defined as the activity concerned with
planning, raising, controlling and administering of funds used in the business.”
Guthmann and Douglas
Featuresof Business Finance:
 Deals with financial aspect
 Concerned with estimation, collection and utilization of funds
 Needs proper planning & control
 Objective oriented activity
 Major aspect of business management
 Dynamic in nature
 Business needs different types of finance.
 Collected from different sources

Need for Business Finance:


No one can start the business or run an enterprise without adequate funds. Every
business requires some money which is called initial capital. The amount of
capital required depends upon the nature and size of business.
Business enterprise requires capital and finance for the following purposes
 While starting a business, finance is required to procure fixed assets and
also for meeting day – to – day expenses.
 To meet the working capital requirement when production process is
lengthy.
 To finance the growth and expansion projects of the company.
Role of Business Finance in an Organization
 Business Finance plays an important role in every firm.
 It affects the survival, profitability and growth of the firm.
 It is necessary for the promotion of an organization.
 It ensures orderly functioning of an organization.
 Finance is the backbone of every business.
 It brings stability to enterprises. 
 Expansion, modernization and diversification is possible only when there
are adequate funds available.
 It supports other functional areas of a business.
 It helps in meeting the objective of wealth maximization.
 Business Finance helps firms solve business problems.
Thus, Business Finance plays an important role in every business
organization.

Principles of Business Finance:

Full Utilization of Maximization of


Funds Return on Investment

Survival and Fair Balance between


Prosperity of Business Liquidity and
Unit Profitability

Good Public
Image
Benefits of Business Finance:
Adequate finance provide the following benefits to a business concern
 The firm can meet its liability on time.
 The firm can carry on its business smoothly.
 The firm can adopt latest technology and new innovative methods of
production.
 The firm can make use of business opportunities.
 The firm can replace its assets and machinery whenever necessary.
 The firm can face recession and depression period of trade cycle.
 The firm can face completion more strongly.
 A business enterprise needs finance at every stage. It must be available in
an adequate amount at the right time for smooth functioning of an
enterprise.
In short we can say that finance is the blood of the business.

Difference between the terms Business Finance vs. Corporate Finance


Objectives of Business Finance:
Business Finance is the finance required for conducting business activities.
 Modern businesses require huge amount of fixed and working capital for
conducting business.
 Business finance is a process of raising, providing and managing of all
the money that is to be used in connection with business activities.
 Financial management is an important functional area of management.
 All other areas or functions depend on finance.

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