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.
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.
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.
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.
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.
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.
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 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
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
Tags : Financial Management - Finance – An Introduction
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