What is meant by Finance?
The large amount of managing money or cash, basically by huge private and government entities or organization is said to be Finance. It confines with the study and creation of such as –
- Money matters.
- Banking system.
- Credit system.
- Investments system.
- Assets and Liabilities.
This combination of all together that makes up Financial Systems.Finance can be superceded by the word Exchange. It is therefore said as exchange of available resources or art of managing various types of resources. Finance is so important today, it is said to be as soul of all our economic activities.
Finance is a necessity for acquiring physical resources, which are very important and needed to accomplish productive economic activities and for carrying business functionalism such as–
- Sales Promotion.
- Pay Compensations.
- Unconfirmed Liabilities.
- Reason for uncertainty and many more.
Now in today’s situation, finance has become the most important natural function and inseparable part of our daily life process. Finance in more specific is solicited with the management issues such as –
- Owned funds generated from promoter contribution.
- Raised funds generated from equity share, preference share, etc.
- Borrowed funds generated from loans, debentures, overdrafts, etc.
Finance also at the same time, confines greater approach of managing the assets generated by the business and other valuable liabilities with better organized fashion. There are 2 main types of finances such as –
- Debt finance is money borrowed from external source like bank.
- Equity finance were investing your own money from other stakeholders, interchange for partial ownership.
Finance consists of 3 interconnected areas such as –
- Management of financial status which involves clarifications and decisions made within the organization.
- Credit and money markets which deals with the financial institutions and with business securities.
- Investments of money which focuses on made by both institutional investors and individuals decisions.
In pertaining to any entity’s management decisions there are 3 types such as –
- Working Capital Management.
- Capital Budgeting.
- Capital Structure.
Finance is the functional process of business which helps to meet its goals and objectives with responsibilities for acquiring funds for the companies, managing the funds within the companies and planning for the expenditure of funds on various business aspects.
Now 5 reasons why Finance is important in today’s business?
Managing finances is a very important business aspect of today, which means having a chance to work toward a stable and rewarding career in financial management field.Financial planning helps in deciding what to spend, when to spend, how to spend and how much to spend according to the funds availability. Here are the below given 5 reasons on importance of finance in today’s business such as –
- Without financial management business cannot exists
- Adequate funds availability
- Cash flow management system
- Always keeping long term goals
- Financial Planning value and importance in a business
- Effect of plans evaluating on stock price and financial quotient.
- To raise the funds identifying exact means to execute systematically.
- Proper forecasting of sales.
- Estimation of assets required for supporting sales.
- Estimation of generated funds within the company.
- Estimation required for external funds.
In today’s business economy, Small businesses and Entrepreneurship are more on rise that means more positions for financial managers will continue to become much more available. Without aneligible person responsible to manage the incomingand outgoing of money a good business cannot exist.
As good business generates money, through this generated money paying bills for materials, payment of salary for the employees in an organization are done. Good business earnings happen by selling quality services or products. Managing financial aspects plays a very vital role in progress of any good business.
Sufficient funds are necessary to meet daily expenses to purchase long term assets for the company’s requirement accordingly; also funds should be there to deal with future unforeseen over costs which may arise. The company should know from where the funds have to be raised and when it should be needed in emergency to deal the monetary crisis.
In an organization, excess cash flow can also become difficult to manage. Having excess amount of funds and not using it in a genuine much useful way is a greater waste of resources. When an organization is having adequate funds they should put it in good
yielding investments by thinking very wisely. And also make sure that they have expansion future plans and think about new ventures which will gain them huge profits to earn for the long run.
Having long term goals in life or business is a very important aspect to keep, once it is done the responsibility has to be fulfilled as per the plan made at any cost to get fulfil the targeted goals to achieve success. In any business entity, financial planning is a process of engaging a proper financial plan to meet its financial goals in a specific time period.
To have long term financial goals in a business is a very important part, were by doing this many upcoming financial crisisin future can be resolved without any hassle. It is always a good idea to have an early well planning goal, especially in finance sinceinvesting on any good options may earn high returns over the period of time to the company to gain financial stability.So investing money with good thoughtful planning from now will make easier to execute such long term goals.
Financial planning creates immense value to the company, without this any of the business entity cannot function properly. It is a major vital venture for all kinds of businesses worldwide. It is done for an entire year to have control over financial activities of the company. The bigger the company, the bigger will be the size of the team working on financial planning and the greater skilled professionals needed.
Financial planning needs the entire support of accurate financial analysis and reporting. It has to be done continuously, with this the outcome of the plan also need to be monitored regularly. In any case the approved plan is not working, then the plan has to be modified instantly or new plan has to be made and adopted with immediate effect to run the business successfully without any kind of hindrance occurring in between.
There are 6 procedures which helps in executing the financial planning of any business such as –
Financial planning always should start before the beginning of any project and should be carried throughout its functioning period of time to have strong control over the finance.
Now finance has become anatural function and highly impossible partto get split from our day to day lives whether from our personal life or from any business.So this article will yield you the understanding of finance with its reasons why it is so important in today’s business. For more information to know about finance you can logon to our website