02

BUSINESS FINANCE

Business activity which is concerned with the acquisition and

conservation of capital funds in meeting the financial needs and
Overall objectives of business enterprise.
B.O Wheeler

Activity concerned with the planning, raising, controlling and

and
administering the funds used in the business.
Guthumann & Dougall
-
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Financial Management

The area of business management

devoted to a judicious use of
capital and a careful selection of sources of capital in order to
enable a spending unit to move in the direction of its
reaching
goals.
- J.F. Bradely

Operational activity of a business that is responsible for obtaining

and affectively utilising the funds
necessary for efficient operations.

- J.L Massie
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Importance of Financial Management

Financial planning & successful promotion

of enterprise
Acquisition of funds as &when required at minimum
possible cost.
Proper use and allocation of funds.
Taking sound financial decisions.
Improving the profitability through financial controls.
Increasing the wealth of investors & the nation.
Promoting & mobilising individual and corporate savings.
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Finance Function

The Process of acquiring and utilizing funds of a business.

- R.C Osborn

Financing consists of raising, providing., managing of all the

money, capital or funds of any kind to be used in connection with
the business.
Bonneville & Dewey
Aims of Finance Function
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1. Acquiring Sufficient funds

2. Proper Utilisation of funds

3. Increasing profitability

4. Maximising firms value

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SCOPE OF FINANCE FUNCTION

1. Estimating financial requirements

2. Deciding capital structure

3. Selecting a source of finance

4. Selecting a pattern of investment

5. Proper cash management

6. Implementing financial controls

7. Proper use of surpluses

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Objectives of financial management

1.Profit Maximisation
Profit is the main aim of every economic activity.
Arguments in favour of profit maximisation as the objective of
business:
When profit earning is the aim of business then profit maximisation
should be the objective.
Profitability is a barometer for measuring efficiency and economic
property of a business enterprise.
Economic and business conditions do not remain same at all the
times.
Profits are the main source of finance for the growth of the
business.
Profitability is essential for fulfilling social goals also.
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Economic and business conditions do not remain sameat
all the times.
Profits are the main source of finance for the growth ofthe
business.
Profitability is essential for fulfilling social goals also.

2.Wealth Maximisation
Financial theory asserts that wealth maximisation is
the single substitute for a stockholder's utility.
When the
firm maximises the stockholder's wealth, the individual
stockholder can use this wealth to maximise his individual
utility.
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FINANCIAL DECISIONS

1.Investment decisions
investment
of
decision
be
related
in the
to the discrimination of total
amount assets to held firm, the composition of these
assets and the business risk complexions of the firm as perceived
by its investors.

2.Financing decisions
Once the firm has taken the investment decision and
committed it self as new investment, it must decide the best means
of financing these commitments. A financial manager has to select
Such source of funds which will make optimum capital structure.
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3.Divident decisions
This relates to the disbursement of profits
back to
investors who supplied capital to the firm. Dividend is
the reward of
shareholder for investments made by them in the share
the company.
capital of
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Functions of finance manager

Financial forecasting and planning

Acquisition of funds

Investment of funds

Helping in valuation decision

Maintain proper liquidity