Financial planning is the application of planning to various aspects of finance function. Basically, business finance involves the formulation of a financial plan that states the quantum of finance required, the pattern of financing and the policies to pursue for the administration of the financial plan. A business enterprise requires short-term and long-term capital. The total capital required by a concern is called capitalization. The short-term capital or the working capital is the capital required to meet the day-to-day obligations or the operating expenses. The long-term capital is required to acquire the fixed assets. Generally, on a conservative ground, a portion of the working capital is also met out of long-term capital.
The capital required may be collected from different sources. A substantial share is raised from internally generated funds. The remaining part is raised from outside sources such as issue of shares and debentures and loans. This pattern of financing is known as capital structure. It is designed in such a way to obtain the required amount needed at the lowest possible cost. Once the required amount is raised, then the funds are allocated in the best possible way to obtain the maximum benefits.
Implementing proper control systems can ensure the efficient use of the funds. Finally, all-important matters are reported to the top management to take proper actions at the right time. The financial reports are analyzed to evaluate the performance of the firm. According to Cohen and Robin, business finance aims at determining the financial resources required meeting the company’s operating program. Business finance also forecasts the extent to which these requirements are met by internal generation of funds and the extent that they will be met from external resources. Business finance helps in establishing and maintaining a system of financial control governing the allocation and use of funds.
Related Articles of Interest :
-
Business Financing
10 August 2010 8:30 PM |
No Comments
When talking about business financing, it is extremely important to understand the term financial planning. It can be defined as the application of planning to the various aspects of the finance function. Basically, business financing involves the formulation of a financial plan which states the...
-
Financial Planners
10 August 2010 8:30 PM |
No Comments
Planning is the specific process of setting goals and developing ways to reach them. The success or failure of any enterprise or project depends mainly on proper planning. It is rightly said that failing to plan is planning to fail. Financial planning is an integral...
-
Business Finance Consultantants
10 August 2010 8:30 PM |
No Comments
Business finance consultants are the backbone of an organization. They help establish the both the long-term and short-term objectives of the firm that makes for effective utilization of the financial resources. They also help in formulating financial and business policies. Financial policies relate to procurement,...
-
Start Up Business Finance
10 August 2010 8:30 PM |
No Comments
For executing a project, implementing a scheme, or for undertaking an operation, there is a general need for finances to start and endeavor and to further develop it. Finances are the roots of every business activity. Every business decision, whether it relates to production, personnel...
-
Business To Business Finance
10 August 2010 8:30 PM |
No Comments
A financial transaction occurs when a financial asset is created or transferred. Examples of financial transactions are loan granted by a bank to a company, equity stock issued by a company, the purchase of debentures in the secondary market and the sale of goods on...
-
Business Finance Software
10 August 2010 8:30 PM |
No Comments
Business finance software is fast gaining popularity, especially in computerized financial planning systems. At the heart of a computerized financial planning system is a model that specifies the relationships relevant to the firm. A computerized financial planning system helps in preparing proforma financial statements, estimating...
-
Business Credit
10 August 2010 8:30 PM |
No Comments
Adequate finance is required to meet the various commitments arising out of business transactions. The financial requirements of business can be broadly classified into two categories, viz., short-term sources and long-term sources. Short-term finance is required to meet the working capital requirements of a business...
-
Small Business Finance
10 August 2010 8:30 PM |
No Comments
Every organization regardless of its size and mission may be viewed as a financial entity. Management of an organization, particularly a business firm, is confronted with issues and decisions that have important financial implications. Questions must be answered like: • What kind of plant and...
-
Venture Capital Business Plan
10 August 2010 8:30 PM |
No Comments
Venture capital finance is instrumental in inducing technological development, stimulating creativity and innovation and nurturing entrepreneurship. Concerted efforts are required by financial institutions, private sectors and other agencies to create a conducive environment for the growth of venture capital. In particular, initiatives are required to...
-
Investment Management Training
10 August 2010 8:30 PM |
No Comments
In the early period of development of finance as a profession, i.e., until the early 1950s, investment management was primarily concerned with the procurement of funds. The subject matter was mainly confined to financial problems arising during episodic events like incorporation, merger, consolidation and reorganization....