Business Finance

Business finance refers to the funds required for carrying out the activities of business. No business can continue without finance so finance is required for every aspects of the business

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Finance is required for the growth of the business.

Financial management is the process of optimum procurement and usage of funds by investing them into long term and short term sources and distributing the surplus to the share holders. It also involves identifying and com pairing the various sources in terms of cost and associated risk.

Financial management aims at

reducing the cost

reducing the risk

ensuring the availability of funds

ensure that funds should not be placed idle.

Ensures that funds should be deployed carefully.

In-spite of all these small objective the main objective of financial management is to maximising the wealth of the share holders. As share holders get profit after all claimants like creditors, suppliers and lenders. So if shareholder are gaining it means that all other claimants are also gaining. When shareholders gain it means that all other objectives of business is automatically fulfilling. These objectives are

1]. Maximisation of profits.

2].meeting financial commitments

3].Maintenance of liquidity

Equity shareholders gain even after the payment of interest to the preference share holders.  The business finance management is based on some crucial decisions. These 3 crucial decision are the decision of Investments. finance and divindens.

The Investments decision is based on where to invest in long term assets or in short term assets. Long term is called as capital budgeting decision and short term is called as working capital decisions. Finance decision involves from where to raise funds. Whether from debts [Debentures. long term loans] or from Equity [shares, bonds]. The Dividend decision is related to the decision of whether to give shareholders dividend or not. And how mush should be given.

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