Importance Of Finance For Business

Importance Of Finance For Business

Importance Of Finance For Business- Business finance is the life-blood of business Any business unit cannot move a single step without sufficient amount of finance.

Finance is as essential to business as breath is for sustaining life.

Finance is the driving force that assists in the formation of new businesses.

Business finance-

Business Finance refers to the money and credit used in business firm for its operations. It is basically concerned  with acquisition of funds , use of funds by a business enterprise.

Or

Business Finance refers to funds(money and credit) required for carrying out business activities, it involves procurement and utilisation of funds so that business firms will be able to carry out their operations effectively and efficiently.

Or

 Businesss finance refers to planning, raising, managing and controlling all the funds used in business enterprise.

Definitions Of Business finance-

According to B.O. Wheeler “ Business finance includes those business activities that are concerned with the acquisition and conservation of capital funds in meeting the financial needs and overall objectives of a business enterprise.”

According to E.W. Walker “Business finance is to planning, controlling, coordinating and implementing financial activities of the business institution.”

According to Professor Gloss and Baker “Business finance is concerned aided with the sources of funds available to enterprises of all sizes and the proper use of money or credit obtained from such sources.”

The main Characterstics of business finance: –

  1. Business finance include all types of capital or funds used in business.
  2. Business finance is needed in all types of organisations.
  3. The term ‘business finance’ is used in broad sense, Businesss finance refers to planning, raising, managing and controlling all the funds used in business enterprise.
  4. The volume of funds needed differs from business to business.
  5. The availability of finance determines the size of the business or its scale of operations.

ALSO READ : Fixed and Working capital

Importance Of Finance For Business

Importance of finance for business as follows-

1.Finance is required for setting up an enterprise.

2.Finance is required to complete the initial activities of the business enterprise.

(Registration, trade Mark development,  place, land, office site, plant installation for the establishment of industries, place for conversion of raw materials into finished products(Factory), water, electricity, telephone, etc. )

3.Finance helps in business firms will be able to carry out their operations effectively and efficiently.

4.Finance is required for purchase of fixed Assets. (Land, Building, Plant, Machinery, Furniture, Fixtures and fitting, Motor Vehicles,Patent, Copy right, Trademark etc.)

5.Finance is required for purchase of Current  Assets( Purchase of Raw Material, stores, loose tools,spare parts, Payment of Wages and salaries, payment of freight etc.)

6.Finance is required for day-to-day operation of a business.( Rent, Wages, Salary, Electric Charges, Bank charges, Commission, office expenses, Administration expenses  etc.)

7.Finance is required for Growth, extension and modernization of business.

8.Finance is required for Payments of Liabilities.(Payment to creditors, Payment to Suppliers, Payment of loan, payment of interest on loan)

9.Finance is required for Sound Business Position.

10.Finance is required for Facing Competition.

11.Finance is required for Replacement of old assets.

2.Finance is also required For Marketing. (Price, product, place, promotion)

13.Finance is required for maintaining  working capital  (current Assets- Current liabilities)

14.Finance helps to take advantage of business opportunities to grow.

15.Finance is also required for arranging those infrastructural facilities which are essential for Business enterprise Like- place, land, office site, plant installation for the establishment of industries, place for conversion of raw materials into finished products, water, electricity, telephone, etc.

16.Business Finance is required for research and development.

17.Finance is also required For Business cycle from production to distribution of goods will run smoothly.

Business finance plays an important role in all these business activities.

ALSO READ : Business Environment: Meaning, Features and Importance

 

 

 

Leave a Comment

error: Alert: Content is protected !!