Financial Management III Semester B.Com St.Berchmans [2010-11]
P a g e
Finance is defined as the provision of money at the time when it is required. The finance canbe basically classified into two:1.
Private financePublic finance deals with requirements, receipts and disbursements of funds in the government institutions likes states, local self governments and central government.Private finance concerned with requirements, receipts and disbursements of funds in thecase of individuals, a profit seeking business organisation and a non- profit businessorganisation.Private finance can be again classified into business finance, personal finance and financeof non profit organisation.
Business finance can be defined as an activity of or process which is concerned with acquisition of funds, use of funds and distribution of profits of a business firm.
Businessfinance can be again divided into 3 ie, sole trader finance, partnership finance andcorporate finance.
Financial management refers to that part of the management activity which is concerned with the planning and controlling of firm’s financial resources
Importance of financial management
Helps in financial planning and successful completion of an enterprise.2.
Helps in acquisition of funds as and when required at the minimum possible cost3.
Helps in proper use and allocation of funds4.
Helps in taking sound financial decisions5.
Helps in improving the profitability through financial control6.
Helps in increasing the wealth of the investors and nation7.
Helps in promoting and mobilising individual corporate savings
It is the most important of all business functions, because the need for money is continuous.
AIMS OF FINANCE FUNCTION1. Acquiring Sufficient Funds.
The main aim of finance function is to assess the financialneeds of enterprise and then finding out suitable sources for raising them. The sourcesshould commensurate with the needs of the business. If funds are needed for longer periodsthen long-term sources like share capital, debentures, term loans may be explored. A