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 quantum of finance required, the pattern of financing and the policies to be pursued 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 so required may be collected from different sources. A substantial share is raised from internally generated funds. The remaining part should be raised from outside sources, such as issue of shares and debentures or the raising of loans. The pattern of financing is known as capital structure. It should be designed in such a way as to obtain the required amount at the lowest possible cost. Once the required amount is raised, then it is to be seen that the funds are allocated in the best possible way to obtain the maximum benefits.
Implementing a proper control system can ensure the efficient use of the funds. Finally, all-important matters should be reported to 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 financing aims at determining the financial resources required to meet the company’s operating program and forecast the extent to which these requirements will be met by the internal generation of funds, and the extent to which they will be met from external resources. Business financing helps in establishing and maintaining a system of financial control governing the allocation and use of funds.
Related Articles of Interest :
-
Business Finance
10 August 2010 8:30 PM |
No Comments
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...
-
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...
-
Financing
10 August 2010 8:30 PM |
No Comments
Financing is one of the most important functions of any enterprise. For carrying out any operation, finance is required. Thus, finance must be raised, allocated and controlled for the effective execution of any function. Finance function is superimposed on all other functions. That is, all...
-
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,...
-
Investment Property Financing
10 August 2010 8:30 PM |
No Comments
The Capital Budgeting decisions generally involve very large amount of capital funds. However, the availability of such funds is very limited. It is therefore, essential that thoughtful and wise decisions are made concerning such investment of capital funds. This alone would result in flow of...
-
Commercial Financing with Bad Credit
10 August 2010 8:30 PM |
No Comments
A wide range of small, medium and startup businesses with bad credit go for commercial loans. Commercial financing assists them to restructure their debts, preserve working capital, increase availability of funds, and reduce expenses. Commercial loans are usually given for a total period of 30...
-
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...
-
Small Business Venture Capital
10 August 2010 8:30 PM |
No Comments
Capital budgeting is very important in small business venture capital. It is the process of making investment in capital expenditure. Capital expenditure refers to expenditure and the benefits that are expected over a period of time, especially exceeding one year. The chief characteristic of capital...
-
Fee Only Financial Planners
10 August 2010 8:30 PM |
No Comments
While talking about fee only financial planners, one thing should be taken into consideration is that “Fee-Only” planners are compensated solely by fees paid by their clients, and do not accept commissions or compensation from any other source. The National Association of Personal Financial Advisors...
-
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...