Home » FINANCE » Importance of Business Finance

Importance of Business Finance

Importance of Business Finance is directly or indirectly involved in the activities of a business organization. Many therefore refer to money as the lifeblood of the organization.

As far as money is concerned. In finance. The extent is the same. One of the main tasks of a business is to finance it. Just as an organism dies if its vitality is not active, so a red light will shine in a business if there is no active financial management at home. The importance of business finance is undeniable.

Importance of Business Finance

Since involved in a business organization, its importance is different for each party. The importance of business financing is discussed below?

A. From the point of view of owners:

The owner always expects that the situation he is in will not exist tomorrow. Wants to get higher return at minimum cost. And in order to fulfill these expectations, proper financial planning and its desired implementation is required. Business financing helps to implement the expectations of the owners are discussed:

1. To achieve the ultimate goals:

Traders manage the business by setting some ultimate goals. Efforts continue to be made to achieve this goal. Money is needed for all business purposes. So money management is also undeniable for the purpose. The task of financial management is to formulate the desired financial plan, how much money needs to be raised, from what source it will be raised, to invest that money through efficient management, to preserve the money invested, and to distribute the profits earned from the project. So its importance is essential.

2. Expansion of business:

Business expansion is a matter of goodwill on the part of the owner. Adequate capital is required for the slightest expansion of any business. Adequate timely financing is not possible without proper financial management.

3. Dissolution of Business:

In case of liquidation of any business, sufficient cash is required to meet the expenses of liability, liquidation, etc. Which revolves around financial management. Combination of Business.

4. Combination of business:

Causes a lot of capital outflow. So here too the owner wants to raise capital through proper financial management.

5. To increase the share price:

The owner is always trying to take the position of his organization in a respectable place in the capital market. And in order to maintain a position with a reputation, it is necessary to work in an effort to increase the share price. In this case too, the need for business financing is inevitable.

B. From the point of view of management:

We know that the management of a registered business organization; Separate from ownership. The artificial entity that the organization enjoys is managed by this management as a representative. However, the owners or entrepreneurs manage this management.

The importance of financing to management is discussed below:

1. Preliminary Expenses:

Entrepreneurs spend a lot on starting a business. Such as- cost of law, cost of registration, cost related to preparation of various survey reports, brokerage cost etc. Which in the language of accounting is amortizzed by the managing authority every year under the name of Fictitious Assets. The task of management is to provide the necessary funds in time, otherwise the business venture will be ruined.

2. Acquired of Fixed Assets:

The next step in forming a company is to start IPLAN activities at home. Management has to acquire various assets to start activities. Such as- building, furniture, machinery – machinery, land etc. These can also be collected through lease. However, in both cases a lot of money is needed. Which is an essential function of business financing.

3. Acquiring (of Current Assets):

Current assets such as cash, raw materials, retail equipment, etc. is an essential element for a business.

4. Current Expenditure:

Cash is essential for carrying out daily expenses such as rent, wages, water, electricity, gas bills, telephones, telegraphs, jewelery, merchandise, etc.

5. Risk Management:

Risk Management In order to deal with such incidents, immediate cash is required, and insurance is also required to avoid future risks. This also requires sufficient funds. It is not possible to determine the price of a product accurately without accurate production costs and potential administrative and sales costs.

6. Fixing Of Price:

In addition, in the case of a productive organization, it is the job of the financial manager to properly evaluate the work-in-process and to analyze the product value of the competing organization. The ultimate responsibility for pricing products rests primarily with the General Manager or the Manager or Directors. But this cannot be done properly without the involvement of the financial manager. .

7. Credit Sales and Purchases:

In order to compete in the business world, companies have started large scale credit buying and selling activities. And the government has a proper financial plan to implement the loan purchase and sale policy, which is the job of finance.

C. From the point of view of creditors:

A registered company is financed through owners, shareholders and debtors. Loans, such as commercial banks, investing institutions, financing institutions, individuals, etc. may be taken from sources.

In addition, if the goods are purchased in bulk, if any assets are purchased on credit, the creditor is created. These aspects are more important to the organization. Because efficient financial management is needed for soup payment, principal payment, dividend payment, loan payment etc.

From the above discussion Importance of Business Finance it is evident that the proper planning of a company for effective financing is to take effective steps accordingly, which is vital for the survival of the organization.

The influence of government and social parties in the financial management of an organization is not less. It is also important to protect their interests. Hope now Clear Importance of Business Finance.