Lecture One: Introduction to Financial Management

To begin, finance is can be define to be the provision of money at the time it is required or needed.
Enterprises all over the world whether big, medium or small needs finance or money to carry on with
their operations as well as achieve set targets. Finance or money undoubtedly forms an integral part of
an organization hence can be said to be the lifeline of an enterprise. Without adequate finance, no
enterprise can possibly accomplish its objectives and even if they do, it will not be sustainable.
Financial Management: simply has to do with how finances of a business concern/entity are
turnaround effectively or well control by those in charge or managers of these enterprises/institutions.
Scenario: Kofi is a provision shop operator and through his efforts, was able to secure some money
to stock/expand his business. Kofi will be doing financial management when he finally receives the
money, begin to effectively allocate the money to procure the various goods and services needed to
stock up or expand the business, control and supervise well how those goods are sold to make sure he
gets the needed returns and profit with losing the money or causing a decrease in its value.
Simply put all those activities carried out by Kofi to enable him successfully receive the money
needed for his business and subsequently making sure the business needs in-terms of money are well
secured and successful can be said to be financial management.
Management: can be said to be the ability to control, organize, coordinate, supervise and monitor,
implement, communicate and direct people, resources and projects effectively.
Traditional classification of Finance:
(i) Public Finance
Public finance deals with the requirements, receipts and disbursements of funds by government
institutions like ministries, local governments, central government and its related institutions. For
example the processes and ability of the government of Zambia to generate revenue needed and
ensure that revenue are used effectively to provide goods and services needed to improve the lives of
citizen can be said to be a practice of public finance management. Here, the ability of the government
to raise the money is the money for the project is “Public Finance”. The management aspect comes in
if the money is then turnaround or controlled effectively to achieve its intended purpose.
(ii) Private Finance.
Private finance is deals with the various requirements, receipts and disbursements of funds in the case
of an individual, a profit seeking business organisation and a non-profit organisation.
In this regards, private finance can be classified into:
a. Personal finance
Personal finance can be said to be the assessment of principles and practices involved in managing
one’s own daily need with regards to funds or money. Alternately, it can be said to be the ability of an
individual to acquire or provide one’s personal needs with demands the use of money or financial
resources. Eg. Ama can be said to be engaged in personal finance when she is able to generate money
on her own and use that money to feed herself, cloth herself as well as provide all her personal needs.
b. Business finance
This deal with the principles, procedures, practices and issues concerning the financial management
(monetary activities) of profit making organisations under the discipline of financing their business
and its operations.
 c. Non-profit organisations finance.
Also, this deals with the practices, procedures and issues relating to the financial management
(monetary activities) of charitable institutions and religious institutions like the churches, mosques,
NGO’s such as Hope of Refuge Foundation, eyata, Together for Development (TFD), among other.

Meaning of Business Finance:

As indicated earlier, the term “business finance” literally means finance of business activities or
operation. The term Business Finance is made up of two words, thus, Business and Finance.
Understanding the meaning of the two words which are business and finance will help to understand
the entirety of concept and meaning of the term business finance.
First of all, the word or term “business” literally means the “state of being busy”. In this regards a
business can be said to be all human activities that relates to the production and distribution of goods
and services to satisfy human wants. This includes also indirect activities such as transport, insurance,
banking and warehousing among others, which help in production and exchange of goods.
Finance on the other hand can also be said to be the management of money or cash flows within and
among an organisations. This deals with the application of the relevant skills in the manipulation,
control and usage of money.
Approaches to Finance
Different authorities or school of thoughts have interpreted the term ‘finance’ differently, these
interpretations could be classified under the following:
i. The first approach or school views finance to be the provision of funds needed by an
institution using and considering the most suitable terms or conditions.
This approach uses the two way concepts such as, the need to raised funds or raising of funds and
at the same time the need to study of financial institutions and instruments from where funds are
coming from or can be procured.
ii. The second approach or school views finance to be only cash or they relate finance to
cash.
iii. The third approach or school views finance to be concerned with the raising of funds and
how effective the funds or monies are utilise.
To conclude, one can now say that “business finance” refers to the activities or processes aimed at
acquiring funds, using of funds and the allocation of profits by a business entity. These activities deal
with financial planning, acquisition of funds, usage and financial controls.

END OF LECTURE ONE, THANK YOU ALL.

CONFIDENCE COFFIE
(www.eyata.org)
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