BUSINESS FINANCE

 -it is knowing what’s coming in and going out.

 -it is the foundation of any business.
 -it is practically the knowledge on how a business should earn and spends
money.
BUSINESS FINANCE is required for
purchasing assets, goods, raw
materials and for performing all
other economic activities.
Precisely, it is required for running
all the business operations.
 FINANCIAL MANAGEMENT

 Financial management can be defined as the

activities involving planning, raising, controlling,
and administering money that is used in the
business. Financial management involves
procuring funds for buying fixed assets, raw
materials, and working capital.

It is the practice of handling a

company’s finances in a way that
allows it to be successful.
 This form of management is
important for various reasons.
• Helps organizations in
financial planning and
acquisition of funds;
• Aids organizations to
effectively utilize and allocate
the funds received or acquired;
• Supports organizations in
making critical financial
decisions;
• Helps in improving the
profitability of organizations;
• Increases the overall value
of organizations;
• Provides economic stability.
The role of the financial
manager
The financial management
department of any company
is handled by a financial
manager.
This department has
numerous functions, such as:
 • Calculating the capital
required.
The financial manager has to
calculate the amount of capital
an organization requires. The
amount required has to be
estimated in such a way that the
earnings in the company
increase.
 • Formation of capital
structure.
Once the amount of capital
has been estimated, a capital
structure needs to be formed
• Investing the capital.
Every organization or company
needs to invest money in order
to raise more capital and gain
regular returns. This means the
financial manager needs to
invest funds in safe and
profitable ventures.
•Allocation of profits.
Once the organization has a solid net
profit, it is the financial manager’s duty
to efficiently allocate it. This could
involve keeping a part of the net profit
for contingency, innovation, or
expansion purposes, while another part
of the profit can be used to provide
dividends to the shareholders.
• Effective management of
money.
The financial manager is also
responsible for effectively managing
the company’s money. Money is
required for various purposes in the
company such as payment of salaries
and bills, maintaining stock, meeting
liabilities, and the purchase of any
materials and/or equipment.
 • Financial control.
Not only does the financial manager
have to plan, organize, and obtain
funds, but he/she also has to control
and analyze the company’s finances.
This can be done using tools such as
financial forecasting, ratio analysis,
risk management, and profit and cost
control.
FINANCIAL SYSTEM
What type of finance
is best for your
business?

It's important to understand the

differences between debt and equity
finance when deciding the right way to
finance your business.
 How much do you need to borrow?
The first thing you need to know is how much money you’ll need. You can get
an idea of this through a number of different methods:

If you’re starting a business – add up your set-up costs such as rent,

equipment, shop fit-out, inventory, wages and super contributions
(including your own), legal and accounting costs.

If you’re purchasing an asset – ask for a copy of the contract with the purchase
price.
If you’re borrowing for cash flow purposes – use cash flow forecasts to identify
any shortfalls.
 FINANCIAL SYSTEM

A financial system is a set of institutions, such as

banks, insurance companies, and stock exchanges
that permit the exchange of funds. The financial
system also includes sets of rules and practices
that borrowers and lenders use to decide which
projects get financed, who finances projects, and
terms of financial deals.
FINANCIAL INSTITUTION
 FINANCIAL INSTITUTION
How Do Financial Institutions Work?

Financial institutions, as the name implies, are

entities that deal in finances. They offer a wide
range of monetary or financial services to
individuals and businesses. From helping
individuals save money to enabling them to
invest in stocks, such institutions serve
different functions simultaneously.
 1.Banks –
is a type of financial institution
that accepts deposits, offers
checking account services, makes
business, personal, and mortgage
loans, and offers basic financial
products like certificates of deposit
(CDs) and savings accounts to
individuals and small businesses.
*Retail and Commercial Banks

Retail and commercial banks allow you to open

deposit accounts and access a wide range of
financial services related to saving and borrowing
money. Retail banks serve individuals, while
commercial banks serve business customers.
Note
Online banks and online banking platforms may not have physical
locations, but they do offer some of the same kinds of financial services
as brick-and-mortar banks.
 2. Credit Unions
Differing from banks, credit unions reinvest money
made from charging interest so they can keep costs low
and benefit their customers. These depository
organizations usually target a specific community or
group of people and require membership. They offer a
variety of traditional banking services that range from
checking and savings accounts to credit card and loan
programs.
 3.Insurance Companies

are financial intermediaries which offer

direct insurance or reinsurance services,
providing financial protection from possible
hazards in the future.
The primary function of these institutions is to regulate the
money supply. With the regular flow of money, the financial
entities keep the financial ecosystem active. The money supply
process must be efficient, given the wide use of money in
carrying out transactions.