What is finance also explain their importance?

Finance is the life blood of a business. It flows in mostly from sale of goods and service. It flows out for meeting various types of expenses. The activating element in any business. Which may activating element in any business. Which may be as industrial or commercial undertaking is the finance.

Definition:

                        Business finance has been defined under as

            “All those activities which have to do with the provision and management of funds for the satisfactory conduct of the business”

According to the B.O.willer. Business financial is defined as “that activities which is concerned with the acquisition and conservation of capital funds in meeting the financial needs and all objectives of the business institution”.

In the light of above two definitions’ business financial is mainly developed around three major objectives. Firstly, to obtain the sufficient supply of capital for the needs of the business. Secondly, to maintain and increase the capital through better management. Third, to male profit for the use of funds which is an overall objective of a business firms.

Importance of the finance:

Before the industrial revolution, financial was not of much importance. The methods of production were simple. Labour at that time was more important than capital and financial.

Since the beginning of industrial evolution, there has been a remarkable growth in production.

The output per worker in every field has been increased many times. The methods of production are complex. The time lag between the production and consumption is long. It has, therefore, increase the important of financial. The needs of financial for a business concern is briefly given belong.

1.                 Cost of  fixed assets:

Financial is required for meeting the cost of fixed assets, such as land, building, machinery etc.

2.                 Cost of current assets:

A firm needs capital to meet the running or operating expenses such as cash, stock of goods etc.

3.                 Cost of promotion:

Initial expenses every business needs, capital for meeting the initial expenses such as legal fee, filling fee and publication of documents.

4.                 Cost of financing:

Capital is also compulsory by an organization for paying commission to underwritten brokerage.

5.                 Cost of establishing business:

A firm also needs capital to meet the losses which are incurred in developing the business to self-sustained stage.

6.                 Selling on credit:

Goods are mostly sold on credit in the market. Since the expenditure on production of goods is usually on cash basic. Therefore the funds are requirement to cover this time period.