Introduction To Business Finance
Business finance is the area of finance that deals with the management of corporate funds and resources. It involves analyzing financial data, preparing financial reports, developing strategies for managing risks, making investment decisions, and setting organizational goals. The relationship between finance and economics is closely intertwined.
Economics helps to explain why prices fluctuate in the markets, provides an understanding of how companies are affected by external factors such as taxation policies and technology advances, and assists in predicting how different economic events will impact a particular industry or market segment. Finance, on the other hand, uses economic theory to develop models to evaluate risk and return from investments. Financial analysis also helps organizations understand how they can manage their resources more efficiently.
Very Short Answer Questions
1.What is Business Finance?
→ Business finance refers to the management of fur in the content of a business firm such as a collection of funds and utilization of funds in an effective & efficient manner to maximize the profit of the business firm.
2. Who is responsible to manage the finance of a business firm?
The financial manager is responsible to manage the finance within a business firm.
3.What is the relationship between finance Economics?
The Financial manager uses microeconomics when Developing decisions so they are closely related to each other.
4. What is the relationship of finance with accounting?
Accounting is record keeping and finance is the use of such information received from accounting records.
5. What are the two roles of a financial manager? They are:
6. What is an ethical ISSUE in the business firm?
The former beans category bears on the discussion made by Finanger managers.
Short Answer Questions
1. What is Business Finance? Explain the relationship of finance with economics
→ Business Finance and economics are related to each other Business finance can’t be isolated from economic discipline describing and characterizing various corporate activities Business Finance Ore connected and interrelated with the principles of economics related to microeconomics, macroeconomics, and public finance as a discipline is derived from economics it involves assessing many, banking credit investments, and other aspects of the financial system Economic -s looks at how goods and services are made disturb distributed and used and how. the overall economy functions along with the people who have economic activity. Financial managers should recognize & understood how monetary policies affect the cost of the fund and the availability of credit.
2. What is Business Finance? Explain the relationship of finance with accounting
→Finance can be defined as the art and science of managing money. Accounting is the methodical or prepared recording reporting and assessment of financial deals and transactions of a business .
Accounting is record keeping and finance is the use of such information received from accounting records Accounting is a data collection- process dealing with accurate recording and reporting Financial managers often turn to account data to assist them in making decisions.
Generally, a company’s accountants are responsible for developing financial reports and measures that assist its managers in assess- ng the past performance and future direction of the firm and in meeting certain legal obligations such as the payment of taxes. finance concerns accounting because financial meeting accounting is one branch of accounting.
3. Describe the responsibilities of a financial manager:
1. Planning and controlling
Forecasting of sales preparation of production schedule to meet the forecaster Sales estimating cost and expenses cash flows etc. are required to plan the future business activity. In this way, efficient and effective forecasting planning and control function of a financial manager is essential to achieve. the business of the firm’s objective.
2. Investment, financing, and Dividend Decision
Financial manager’s responsibility under an investment decision involve deciding the assets mix to support the projected Under a financing decision a financial manager has the responsibility to decide the appropriate mix of short-term and long-term financing. The financial manager is responsible to make an optimal Capital structure that minimizes the cost of capital. The financial manager makes dividend decisions financial manager decides whether to pay a cash dividend or stock dividend or stock split- or reserve reverse stock split, stock repurchase, etc.
Dealing with Financial Markets
Financial markets are markets where financial instruments, such as bonds, securities and currencies, are traded. They are used to facilitate the exchange of goods and services between buyers and sellers. The main types of financial markets include the stock market, bond market, currency market and derivative markets. They provide a platform for investors to trade in various asset classes including stocks, bonds, commodities and derivatives. Financial markets provide liquidity to businesses by allowing them access to capital at lower interest rates than banks or other traditional financial institutions.
3. Describe the responsibilities of a financial manager
1. Planning and controlling forecasting of sales
Preparation of production schedule to meet the forecasted Sales estimating cost and expenses cash flows etc. are required to plan the future business activity. In this way, efficient and effective forecasting planning and control function of a financial manager is essential to achieve. the business of the firm’s objective.
2. Investment, financing, and Dividend Decision
Financial manager’s responsibility under the investment decision involves deciding the assets mix to support the projected Under the financing decision financial manager has the responsibility to decide the appropriate mix of short-term and long-term financing. The financial manager is responsible to make an optimal Capital structure that minimizes the cost of capital. The financial manager makes dividend decisions financial manager decides whether to pay a cash dividend or stock dividend or stock split- or reserve reverse stock split, stock repurchase, etc.
3. Dealing with the Financial Market
The financial manager must deal with the money and capital markets. Financial markets are important for the Financial manager because his/her performance is seen in these markets as share price behavior Required funds are collected from the Financial markets and the securities are also traded in the financial 1 markets.
Managing risk is one of the most important responsibilities of financial managers financial managers must identify the risks and their measurement After measuring the risk he/she should compare calculated risks. with returns to make decisions There may be various risks like civil war. natural disaster price level changes interest rates change etc. The financial manager! manages these types of risk by using op of insurance portfolios management, hedging, etc.
4. Explain the ethical issues in financial decisions
Severalethical issues arise in finance. They can be grouped into financial markets financial services and financial management. Ethical issues in
Financial management falls into two broad categories: ethical obligations. or tubes of a financial manager of a corporation and the ethics of organizing a corporation with shareholders’ wealth maximization. The former category beat on decisions made by financial managers, whereas the latter is a mat. the largely whereas the latter is a mar- largely for the government in establishing the laws. of corporate governance.
Long Answers Questions.
1. What is business finance? Explain the relationship of finance. with economics and accounting.
Business Finance refers to the management of funds in the context of business. such as a collection of funds and utilizing actions of funds effectively and efficiently way to maximize the profit.
Finance is closely related to accounting and economics all the decisions taken by a finance manager are influenced by accounting and economics directly or indirectly. A wise finance manager only takes those decisions which are beneficial for any business firm. Accounting is the process of record keeping in Systematic. Format.
It contains financial data such as Balance sheets, Income statements, cashflow w statements, etc. A financial manager uses accounting data for financial analysis and decision-making process finance helps to improve the financial level of the company through appropriate decisions due to the help of accounting-
Business finance is also related to economics Business finance can’t be isolated from economics disciplines describing and character terrorizing various corporate activities Business finance is connected and interrelated with the principles of economics related to microeconomics macroeconomics and public finance, as a discipline derived from economics, involves money regulation, banking, credit, investments, and aspects of the financial system.
A financial manager should be and updated on economic principles because the indicators of economics determine the market. The ability of various goods and services.
Hence, for the betterment of any business firm joint efforts of these three subjects finance economics, and accounting as needed which creates closed supervision between them and that makes others. They co-bundled with each other.