Business Finance Definition:
Business finance comprise an area of finance that focuses particularly on the way in which large companies have the ability to create and sustain a certain value by making efficient use of all resources; They are strongly linked to disciplines such as economics and accounting. The main objective possessing business finance is to maximizing the value corresponding to the shareholders of the company or to the owners of it.
Starting from the main objective of business finance, which is to maximize profit for shareholders and owners, one of the circumstantial factors before to carry them out is undoubtedly the amount of the contribution of measurement a decision, precisely to meet this factor, have created different types of technical analysis and valuation of assets.
Key Functions of Business Finance:
Primary functions of business finance are categorized into four different groups. They are:
1. First we have the investment decisions, which usually always taken based on the study that the company makes on the assets which will make the investment.
2. The second group is that of financing decisions, where the different ways to obtain the funds required so that the company can own assets in which you want to invest are studied.
3. The third group of decisions on dividends, and in this particular case it is important to note that you must balance all the crucial aspects of the company. In a way, this implies remuneration in terms of equity of it and moreover it is limited to the organization of financial resources which you can use.
4. The fourth and last group corresponding to business finance is of managerial decisions, which are directly relationships with operational and financial decisions that are made every day.
Characteristics / Features of Business Finance:
Business finance have some features that helps us to differentiate with other branches related to finance; for example, business finance generally tend to value both the time and money spent by a company, what you mean when an investor expects a profitable return, it is exposed to run very high risks. Anyway we must say that most investors are usually used to face this kind of risk, but still, of course, will always seek ways to reduce the risk you run.
Moreover, business finance are characterized by offering long-term investments to be carried out simple and similar, because the bottom line here is that all investments in company project arises with sufficient finance. Opportunity costs are also part of the characteristic factors relating to business finance, and in this case we must say that this is the highest performance that finance will not be able to win in the event that funds are invested in particular project. The opportunity costs are usually associated with the losses that an investor is willing to take when an option that is best to use the corresponding money is not chosen.
Business finance often provide some dilemmas for investors, for example, one of the most common is the one between liquidity and the need to invest, and this rethinking because every company prefers own money, but despite that, they often choose to sacrifice this liquidity in order to generate more utilities. Another of the dilemmas posed by business finance is one that is centred between risk and profit. As we said earlier in this article, the investor whenever you execute an investment is taking a risk of loss that can be either very large or very small depending on the type of investment and the economic impact, whether positive or negative than the same present.
How to Manage your Business and Personal Financial Resources:
When you are starting a business, it is important to manage business finance and personal finance. Money must be kept separate so that it is easier to track that personal funds are not used in business expenses.
1. Take Separate Accounts:
Business finance and personal finance to maintain the home and the family must be managed discretely. This confusion arises when making payments of taxes and other legal responsibilities, helps to account for the money that belongs to the business are avoided, and helps you keep track of how and where the money is spent. Carrying separate accounts also shields personal appeals against debts and business expenses, if it fails to succeed.
2. Ways of keeping Accounts Separate:
It is good to have a separate bank account for the business. It is easier to control business costs if managed from a single account, and a clear idea about the income. Keep the money in a safe place. Ask other business owners to do the same. Open an account with banks having great savings plans. Adopt a good accounting system that permits control of your expenses. Talk to owners of prosperous businesses and ask about the accounting systems that provide them with good results.
3. Pay a Salary and consider it as a Business Expense:
Decide in advance how much you want to invest personal savings in the business. Set a static limit that will help you determine whether or not it is worth investing money in that business.
4. Do not misuse of Business Funds:
As a business proprietor, you might be interested to consider all gains it as personal income, but even if you know who manages the money, you should not treat it as your own, and that doing so could results in other risks. For example, if you start borrowing as collateral to the business then you cannot afford it; the company would be at risk, as well as investments of other people will be also at risk. Here are the precautions you should undertake when utilizing business funds. This will help you as a guide in how to manage small business finances.
Precaution Measures – Manage Small Business Finances:
If you need to borrow money for business, use the money only for the cost of this. Make clear that if the business throws more money than expected over a period of time, that money must be saved or reinvested. You and the other employees have fixed salaries and that should not change until there is a new financial business analysis.
Advantage and Benefits of Personal Finance:
To open a business, then it offers some advantages offered to have personal resources in order. You know in advance how to spend with attention and maintain a detailed audit of revenue and expenditure. It is likely to ensure a strong credit history and a good reputation because it has managed money dutifully, which can help you get support for business. If you ever need a loan, and have a record of your finances; present your finances in order before a bank will help you increase your chances to be eligible for a loan. It will be easier to set aside money from their savings to support family while starting the business or generate savings from business finance.
- Tutorial Course - Basics of Business for Beginners Module -
» e-Learning Chapter 1: How to Start a Business? Step by Step Guide for Beginners to Business Basics.
» e-Learning Chapter 2: Business Basics and Fundamentals for Beginners before writing a Business Plan.
» e-Learning Chapter 3: Top 10 Best Small Business Ideas with Low Investment to Start a Business.
» e-Learning Chapter 4: Top 10 Secret Rules on how to be a Successful Business Owners in the world?
» e-Learning Chapter 5: What is Online Marketing? Definition, Terms and Campaign Strategies.
» e-Learning Chapter 6: What is Business Administration? Functions and Fundamentals.
» e-Learning Chapter 7: What are Business Administrative Process and Procedures?
» e-Learning Chapter 8: What is Business Management? Definition, Fundamentals and its Effects.
» e-Learning Chapter 9: What is Business Analysis? Definition, Techniques and Methodologies.
» e-Learning Chapter 10: What is Business Project? Definition, Types of Project Management.
» e-Learning Chapter 11: What is Project Life Cycle? Definition, Stages, Phases of Project.
» e-Learning Chapter 12: What is Business Ethics? Definition, Types and its Importance.
» e-Learning Chapter 13: What is Business Intelligence? Definition and Components of BI Tools.
» e-Learning Chapter 14: What is Corporate Social Responsibility? Definition, Types and its Importance.
» e-Learning Chapter 15: What is Business Communication? Definition, Examples and its Importance.
» e-Learning Chapter 16: What are the different Methods, Modes and Types of Business Communication?
» e-Learning Chapter 17: What is Communication Strategy? Definition, Examples and Types of Barriers.
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» e-Learning Chapter 19: Business Quiz – Basics of Business for Beginners Module.