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Business Finance Loan
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Today, almost every organization irrespective of its size and mission could be viewed as a financial entity. The management of an organization, and more a business firm, is facing with issues and decisions which could have some key financial implications. Questions such as the following should be answered. This includes:
• What kind of plant and machinery should the company buy
• How should the company raise finances
• How much should the company invest in inventories
• What should the companys credit policy be
• How should the company gauge and monitor its financial performance
Business finance is more concerned with the acquisition and use of funds. The scope of Business finance could be defined in terms of the following questions: How large should the company be and how fast should the company grow What should be the composition of the companys assets What should be the mix of the companys financing How should the company analyze, plan and control its finance
In sum, the business finance rests on the premise that the aim of the firm should be to maximize the value of firm for its equity shareholders. What could possible be the justification for this objective It seems to provide a rational guide for business decision-making. It also seems to promote efficient allocation of resources more in the economic system. The savings are primarly allocated on the basis of expected return and risk. It is also based on the market value of a firms equity stock which reflects the risk-return trade-off of investors in the market place.
Therefore, when a company maximizes the market value of its equity stock, it makes sure that its
decisions are consistent along with the risk-return preferences of investors. This also suggests that the company allocates resources optimally. If a company does not pursue the goal of shareholder wealth maximization, it shows that its actions result in sub-optimal allocation of resources. In turn this leads to inadequate capital formation and lower rate of economic growth.
Business finance offers detailed information about subjects like Business Finance, Small Business Finance, Business To Business Finance, Business Finance Software and more such topics. Also, Business Finance is affiliated with Auto Financing. Financial planning is nothing but the application of planning to various aspects of finance function. Moreover, business finance involves the formulation of a financial plan. This plan states the amount of finance required. The plan also states the pattern of financing and the policies. This is to pursue for the administration of the financial plan. A business enterprise needs short-term and long-term capital. The total capital which is needed by a concern and this is called capitalization. The short-term capital or the working capital is the capital which is needed to meet the day-to-day obligations. This is also the capital which is needed for managing the operating expenses. The long-term capital is needed to get the fixed assets. More generally, on a very conservative ground, a portion of the working capital is also met from long-term capital.
The capital which is needed can be collected from various sources. A fair share is raised from internally generated funds. The remaining share is raised from other sources from outside like issue of shares and debentures and loans. This pattern of financing is called capital structure. This capital structure is designed in such a way so that the much needed amount is got at the lowest possible cost. Once the needed amount is raised, later the funds are allocated in the best possible way and this is to obtain the maximum benefits.
By implementing proper control systems, you can be ensured that there is proper use of the funds. Ultimately, all of the important matters are reported to the top management people. This is to take proper actions at the appropriate time. The financial reports of the company are analyzed. This is done to evaluate the performance of the company. According to Cohen and Robin, Business finance looks at determining the financial resources which are needed for meeting the companys operating program. Business finance also projects the extent to which these requirements are met by internal generation of funds. It also projects the extent that they will be met from outside resources. Business finance also helps in establishing and maintaining a system of financial control. This is more related to governing the allocation and use of funds.
For executing a particular project, or for implementing a scheme, finance are the primary requirement. Even for undertaking an operation, there is a need for finances to start. There is a need for endeavor and also to further develop it. Finances are the roots of every business activity and along with every business decision, whether or not it relates to production, marketing or personnel they will definetly have a financial implication. The ultimate criterion for the selection of any alternative course is nothing but its financial viability.
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