Home | ARTS | Financial Management | Types of Finance

Financial Management - Finance – An Introduction

Types of Finance

   Posted On :  19.06.2018 09:15 am

The term ‘business finance’ is very comprehensive. It implies finances of business activities. The term, ‘business’ can be categorized into three groups: commerce, industry and service. It is a process of raising, providing and managing of all the money to be used in connection with business activities.

Types of Finance
 

Business Finance

 
The term ‘business finance’ is very comprehensive. It implies finances of business activities. The term, ‘business’ can be categorized into three groups: commerce, industry and service. It is a process of raising, providing and managing of all the money to be used in connection with business activities.
 
It encompasses finance of sole proprietary organizations, partnership firms and corporate organizations. No doubt, the aforesaid organizations have different characteristics, features, distinct regulations and rules. And financial problems faced by them vary depending upon the nature of business and scale of operations. However, it should be remembered that the same principles of finance are applicable to large and small organizations, proprietary and non-proprietary organizations.
 
According to Guthmann & Dougall, business finance can be broadly defined as the activity concerned with planning, raising, controlling and administering of funds used in the business.
 
Business finance deals with a broad spectrum of the financial activities of a business firm. It refers to the raising and procurement of funds and their appropriate utilisation. It includes within its scope commercial finance, industrial finance, proprietary finance corporation finance and even agricultural finance.
 
The subject of business finance is much wider than that of corporation finance. However, since corporation finance forms the lion’s share in the business activity, it is considered almost inter-changeable with business finance. Business finance, apart from the financial environment and strategies of financial planning, covers detailed problems of company promotion, growth and pattern. These problems of the corporate sector go a long way in widening the horizon of business finance.
 
The finance manager has to assume the new responsibility of managing the total funds committed to total assets and allocating funds to individual assets in consonance with the overall objectives of the business enterprise.
 

Direct Finance

 
The term ‘direct’, as applied to the financial organisation, signifies that savings are affected directly from the saving-surplus units without the intervention of financial institutions such as investment companies, insurance companies, unit trusts, and so on.
 

Indirect Finance

 
The term ‘indirect finance’ refers to the flow of savings from the savers to the entrepreneurs through intermediary financial institutions such as investment companies, unit trusts and insurance companies, and so on.
 
Finance administers economic activities. The scope of finance is vast and determined by the financial needs of the business enterprise, which have to be identified before any corporate plan is formulated. This eventually means that financial data must be obtained and scrutinised. The main purpose behind such scrutiny is to determine how to maintain financial stability.
 

Public Finance

 
It is the study of principles and practices pertaining to acquisition of funds for meeting the requirements of government bodies and administration of these funds by the government.
 

Private Finance

 
It is concerned with procuring money for private organization and management of the money by individuals, voluntary associations and corporations. It seeks to analyse the principles and practices of managing one’s own daily affairs. The finance of non-profit organization deals with the practices, procedures and problems involved in the financial management of educational chartable and religions and the like organizations.
 

Corporation Finance

 
Corporation finance deals with the financial problems of a corporate enterprise. These problems include the financial aspects of the promotion of new enterprises and their administration during their early period ; the accounting problems connected with the distinction between capital and income, the administrative problems arising out of growth and expansion, and, finally, the financial’ adjustments which are necessary to bolster up to rehabilitate a corporation which has run into financial difficulties.
 
The term ‘corporation finance’ includes, apart from the financial environment, the different strategies of financial planning. It includes problems of public deposits, inter-company loans and investments, organised markets such as the stock exchange, the capital market, the money market and the bill market. Corporation finance also covers capital formation and foreign capital and collaborations.
Tags : Financial Management - Finance – An Introduction
Last 30 days 249 views

OTHER SUGEST TOPIC