CONTENT: 1.Introduction 2.Business Finance: Concept 3.Scope Or Content Of Business Finance 4.Objectives Of Financial Management 5.Approaches Of Business Finance 6.Conclusion 7.Reference

INTRODUCTION Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise. Financing, simply put, is the act of bringing money into an organization. Businesses can be financed in a number of ways, each of which features its own advantages, disadvantages and unique features. Common methods of financing a business include taking on debt and taking advantage of credit arrangements, financing through equity investment or earning income through investment products that bear interest or increase in value.

BUSINESS FINANCE: CONCEPT In our present day economy, finance is defined as the provision of money at the time when it is required. Every enterprise whether big, medium or small, needs finance to carry on its operation and to achieve its targets. In fact, finance is so indispensible today that it is rightly said to be the ‘lifeblood’ of an enterprise. Without adequate finance, no enterprise can possibly accomplish its objectives. Financial management can be defined as the process of raising, providing and administering of all money or funds to be used in the business enterprise. Financial management refers to that part of the management activity which is concerned with the planning and controlling of firms financial resources. It deals with find out various sources and application of funds for the firm. The sources must be suitable and economical for the needs of the business. The most appropriate use of such funds also forms a part of financial management. As a separate managerial activity, it has a recent origin. Thus, financial management deals with financial planning, acquisition of funds, use and allocation of funds, and financial controls.

According to Guthmann and Dougall, “business finance can be broadly defined as the activity concerned with the planning, raising, controlling and administering the funds used in the business”. In the words of Wheeler, “that business activity which is concerned with the acquisition and conservation of capital funds in meeting the financial needs and overall objectives of business enterprise”.

SCOPE OR CONTENT OF BUSINESS FINANCE The main objective of financial management is to arrange sufficient finances for meeting short-term and long-term needs. These funds are procured at minimum costs so that profitability of the business maximize. With these things in mind, a financial manager will have to concentrate on the following areas of finance Estimating financial requirement: the first task of a financial manager is to estimate short-term and long-term financial requirement of the business. For this purpose, he will prepare a financial plan for present as well as for future. The amount required for purchasing fixed assets as well as needs of funds for working capital will have to be ascertained. Deciding capital structure: the capital structure refers to the kind and proportion of different securities for raising funds. After deciding about the quantum of funds required it should be decided which type of securities should be raised. It may be wise to finance fixed assets through long-term debts. Even here if gestation period is longer, then share capital may be most suitable. Long-term funds should be employed to finance working capital also, if not wholly then partially.

Selecting a source of finance: after preparing a capital structure, an appropriate source of finance is selected. Various sources, from which finance may be raised, include share capital, debenture, financial institutions, commercial banks, public deposits, etc. if finances are needed for short period then banks, public deposits and financial institutions may be appropriate. Selecting a pattern of investment: when funds have been procured then a decision about investment pattern is to be taken. The selection of an investment pattern is related to the use of funds. The decision making techniques such as capital budgeting, opportunity cost analysis etc. may be applied in making decisions about capital expenditures. While spending o various assets, the principle of safety, profitability and liquidity should not be ignored. Proper cash management: the cash management is also an important task of finance manager. He has to assess various cash needs at different times and then make arrangements for arranging cash. Cash management should be neither there is a shortage of it and nor it is idle. Any shortage of cash will damage credit worthiness of the enterprise. The idle cash with the business will mean that it is not properly used.

Implementing financial control: an efficient system of financial management necessitates the use of various control devices. Financial control devices generally used are: (a) Return on Investment, (b) Budgetary control, (c) Break-even analysis, etc. the use of various control techniques by the finance manager will help him in evaluating the performance in various areas and take corrective measures whenever needed. Proper use of surpluses: the utilization of profits or surpluses is also an important factor in financial management. A judicious use of surpluses is essential for expansion and diversification plans and also in protecting the interest of shareholders.

OBJECTIVES OF FINANCIAL MANAGEMENT Financial management is concerned with procurement and use of funds. Its main aim is to use business funds in such a way that the firm’s value or earnings are maximized. There are various alternatives available of using business funds. Each alternative course has to be evaluated in detail. The pros and cons of various decisions have to look into before making final selection. The main objective of a business is to maximize the owner’s economic welfare. This objective can be achieved by: Profit maximization: profit earning is the main aim of every economic activity. A business being an economic institution must earn profit. To cover its costs and provide funds for growth. No business can survive without earning profit. Profit is a measure of efficiency of a business enterprise. Profits also serve as a protection against risks which cannot be ensured. The following arguments are advanced in favour of profit maximization as the objective of business:

When profit earning is the aim of business then profit maximization should be the obvious objective. Profitability is the barometer for measuring efficiency and economic prosperity of a business enterprise, thus, profit maximization is justified on the grounds of rationality. Economic and business conditions do not remain same at all the times. There may be adverse business conditions like recession, depression, severe competition etc. a business will be able to survive under unfavorable situation, only if it has some past earnings to rely upon. Therefore, a business should try to earn more and more when situation is favourable. Profitability is essential for fulfilling social goals also. A firm by pursuing the objective of profit maximization also maximizes socio-economic welfare. Wealth maximization: Wealth maximization (shareholders' value maximization) is also a main objective of financial management. Wealth maximization means to earn maximum wealth for the shareholders. So, the finance manager tries to give a maximum dividend to the shareholders. He also tries to increase the market value of the shares. The market value of the shares is directly related to the performance of the company. Better the performance, higher is the market value of shares and vice-versa. So, the finance manager must try to maximise shareholder's value.

Approaches of business finance: Traditional Approach: The scope of finance function was treated, in the narrow sense of procurement or arrangement of funds. The finance manager was treated as just provider of funds, when organisation was in need of them. The utilisation or administering resources was considered outside the purview of the finance function. It was felt that the finance manager had no role to play in decision-making for its utilisation. Others used to take decisions regarding its application in the organisation, without the involvement of finance personnel. Finance manager had been treated, in fact, as an outsider with a very specific and limited function, supplier of funds, to perform when the need of funds was felt by the organisation.

Modern Approach: Since 1950s, the approach and utility of financial management has started changing in a revolutionary manner. Financial management is considered as vital and an integral part of overall management. The emphasis of Financial Management has been shifted from raising of funds to the effective and judicious utilisation of funds. The modern approach is analytical way of looking into the financial problems of the firm. Advice of finance manager is required at every moment, whenever any decision with involvement of funds is taken. Hardly, there is an activity that does not involve funds.

Conclusion Business finance is a term that encompasses a wide range of activities and disciplines revolving around the management of money and other valuable assets. Making wise and profitable investments can finance business operations with no strings attached. Each type of financing should be used with caution and vigilance. Taking on too much debt can dilute company performance metrics such as the debt-to-assets and times-interest-earned ratios, as well as reducing profit margins. Financing too heavily through equity can cause original company founders to lose control of the company completely over time. Investing too much money in risky investments can cause a company to lose its cash reserves quickly.

Reference: 1. Gupta k. Shashi: “Financial Management- principles and practices” Kalyani Publishers- New Delhi Tulsian P.C. Tulsian Bharat: “Financial Management- a self study text book” S. Chand and company ltd Ram Nagar New Delhi Internet: a. b. c.