FINANCE FOR A BUSINESS

Finance for a Business

Finance for a Business

Introduction

The aim of any function of finance is to accomplish three benefits which are basically the main root for business. These are proper business support service, lowest cost for operation and effective environmental control. Without money, to run a business is impossible, it is true that money is lifeblood of business and finance is the nerve centre of business. Finance is needed for promoting or creating a business, for gaining assets, developing products, running market surveys and advertising the product or services offered by company.

The tradition view of finance stress on reactive, efficient, quantitative and risk averse while, new version is on vision-oriented, opportunity & growth, spontaneous and risk-taking. The focus of this paper would be on Understanding the sources of finance available to a business, Understanding the implications of finance as a resource within a business, able to make financial decisions based on financial information and able to evaluate the financial performance of a business.

Discussion

Section 1: Understanding the sources of finance available to a business

The driving force behind every lucrative venture is finance. Business need capital to funds their operation and to produce cash flows and revenues. Since each company cannot access sufficient cash to finance their entire business, there are different options of funding which make easy for business to further proceed with their operations and also that they can choose financing options according to their business needs (Goel, & Hasan, 2004, p. 12).

Identify the Sources of Finance Available To a Business

The following are different sources of finance available to company to finance their operations.

Internal sources of finance: Raised from within the firm.

Personal savings: This is usually for start-up companies in order to meet their initially requirement. Sometime, when companies' experiences huge financial crisis, owners and partners pump money in the company from their own pocket.

Retain Profits: This is cash that is product by company in excess of the target revenues i.e. undistributed profits. This source is utilized by the company for expansion purpose or other profitable projects.

Sale of Fixed Assets: This option is availed by the company when company need to purchase new equipment and does not have enough money to purchase it. Considering this factor, company sale their asset and purchase new equipment adding lesser amount (usheproduction).

Working capital: This source of fund that is obtain through company manage their daily activities i.e. current assets - current liabilities.

External sources of finance: Raised outside the firm i.e. from third party. This is further divided into ownership and non-ownership capital.

Ownership capital: Money invested by company themselves. Profit is shared among investors.

Issuance of shares (ordinary and preference): Company issue shares in order to raise fund from the public. These are part of ownership capital since investors have right in profit.

Initial public offering: These are also part of Ownership Capital and they are issued when company for the first time issuing shares in public for certain project ...