The specialised study of how an individual or a company manages its funds is known as Finance. It refers to the money required for carrying out business activities. It involves all activities right from the estimation of funds to their acquisition, utilization and disposal. Finance is the lifeblood of any business.
According to Guthumann and Dougall, “The activity concerned with planning, developing, managing, administering and increasing of the capital used for business purposes is known as finance.”
The mere inception of a business idea is not enough, it can only be brought to fruition given there are enough funds to enable all such functions. The basic function of every organization is to either manufacture goods or offer services. This function can only be met when there is enough money to bear all such expenses. Similarly, all the goals of expansion and growth are only possible when there are enough funds in the firm. The financial requirements of a business can be categorized as follows:
- Fixed Capital: Such funds are used for investments to be made in long-term projects and assets the benefits from which would be reaped by the firm over a long period of time. Such capital is used to purchase land and building, fixtures and other such long-term assets.
- Working Capital: Such funds are used in the day-to-day operations of a firm. Such operations include holding current assets and settlement of current liabilities.
It is noteworthy that only the estimation of funds does not suffice, but the decisions pertaining to raising, utilizing and controlling such funds also have to be made.
This part is about the organization, operation and growth of the finance and financial system. It provides an understanding of the working of financial markets and institutions.
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