11-10-2012, 03:19 PM
INTRODUCTION TO BUSINESS FINANCE
BUSINESS FINANCE chap 1.pptx (Size: 225.7 KB / Downloads: 32)
What is business?
Is an entity on which the skills, energy and enterprise of owners and partners are linked with money, its sources and investments, and its success is measured by wealth, or profit the business gets.
With a primary goals:
To earn profit
To increase its own value as an economic entity
To improve the quality of life in the community
Elements to be successful in business finance function (ernest jones, 1994)
First, the business entity must obtain money from the right sources and invest in the right places;
Second, it must continue to attain its purpose of gaining profits;
Third, cash must be available when it is needed, and its availability can be crucial in some decision-making situations.
Areas of finance
Study of Financial Institutions
Concerned with the creation of financial assets (originated from investment bankers and financial intermediaries)
transfer of savings of individual or depositors to firms needing funds and this transfer of fund produces financial assets
Study of investments
concerned with the analysis of individual assets and the planning for well diversified portfolios.
includes financial planning, identifying financial goals, assessment of available securities, and constructing diversified portfolio.
Corporate or Business Finance
Studies the role of financial manager, his ability to meet obligations as they come due
Identifying the best sources of funds
Allocating resources among available investment alternatives.
Functions of business finance
Allocating the financial resources of the company.
the objective is to be assured that funds are channeled to activities that are considered profitable and/or increase the value of the business itself and that company costs and risks are minimized.
Procurement of funds needed
the objective is to be aware of the different sources of funds and cost involved
Efficient and effective utilization of funds
the objective is to make sure that financial resources are actually being used for what they have been intended