1. Financial management Definitions: Financing of industry and trade refers to the operations involved in providing capital or funds to these business organizations. The word “Finance” refers to those activities involved in seeing that an individual or organization has the cash with which to pay its bill promptly.

2. Definition: The “Encyclopedia Britannica” defines it by saying that “Finance is that area or set of administrative functions in an organization which have to do with the management of the flow of cash so that the organization will have the means to carry out its business objectives as satisfactory as possible and at the same time meet its obligations as they come due”.

3. Definition: Business finance is also defined by Wheeler as “the acquisition and conservation of the capital funds in meeting the financial needs and overall objectives of business enterprise”. In simple words, the refers to the prevision of funds needed by an enterprise for its smooth running.

4. Why Business Needs Finances?

5. Business requires capital for two purposes firstly for initial expenditure on buildings, lands, and machinery and other equipments. For meeting these initial expenditures “Fixed capital” in required. Secondly “Floating” or “Circulating” capital is required for carrying on the current transactions use in the process of production.

6. It is apparent that the finance must be provided both for starting the business and also for running the same. Without adequate finance no trade or industry can successfully and smoothly run according to the required standard and objectives.

7. Importance of Finance: Finance is the soul of business enterprises because on in depends the success of any business organization.

8. Many firms fail simply because of inadequacy of finance. The real work in promoting an organization is therefore, the determination and provision of adequate finance. In fact, finance is very important branch of the distributive side of economic activities. The need for finance arises from the fact that a considerable time passes before the value of a good is realized by the manufacturer, who must carry on production work with borrowed money.

9. The importance of finance is changing with the change in time and process of production. When methods of production were simple and easy in nature, finance was not so important, because the goods were produced in a simple form with some simple tools and machinery. In simple words, the production was “Labor intensive”

10. with the introduction of science and technology and invention of new methods of production and also other related changes in the world economy, the importance of finance was very much realized in every field of production. At present, adequate provision of finance is the basic requirement for the development of any sector of an economy. Now the production is generally carried on large scale basis where bulk of capital or finance is required. Moreover, science and technology has their own affects in the modern production.

11. These days finance has become one of the most important administrative functions in the business. It has been given the same importance as given to production and market or any other function. It has been fully observed that beginning of every undertaking is finance. The problems of finance have become important with its important administrative aspects.

12. Money Market and Capital Market:

13. It is already given that a business enterprise needs “fixed Capital” for meeting its initial expenditures or for the establishment of industry or financing its fixed assets like land, buildings, machinery and acquirements. Whereas “circulating or floating capital” is required for running the business or carrying production or for meeting the contingent expenses.

14. There are different agencies which supply different kinds of capital to any business organization. These agencies are known as “Money market” and “Capital Market”, whether, it is the money market or capital market, money is being bought and sold for varying periods of time. Money is here for hire.

15. In money market, the period of hire is one year or less. On the other hand, in capital market the period is more than one year. Money market provides capital to any business organization for the period of one or less than one year for the requirements of running the business. Capital market, supplies funds for financing fixed assets like land, building etc. for a longer period of time. Both the money market and the capital market may be jointly referred to as “financial market”.

16. Since present time production is a capital intensive, all the financial market of a country influence the nature scope and rate of industrial and economic development of the country. A full range of borrowing and lending markets is needed for the most complete economic potential of a country to be realized a well organized financial market plays an important role in overall economic development of a country.

17. CATEGORIES OF FINANCE The general subject of finance is usually divided into categories according to the type of organization it serves. In its major classification, it can be divided into the following categories. The general subject of finance is usually divided into categories according to the type of organization it serves. In its major classification, it can be divided into the following categories. Public Finance Public Finance Private Finance Private Finance

18. Public finance is concerned with the income and expenditure of public authorities such as state, nation and municipal committee etc. It is that branch of economic which deals with the financial problems of state. Private finance is generally further divided into the following kinds. 1.Personal Finance 2.Business Finance 3.Finance of Non-Profit Organization

19. Personal Finance is concerned with the principles of managing one’s own day to day financial activities. For example, the money which is lying in the pocket of a person or which has been deposited into his personal account of bank, is his personal finance.

20. Business finance is mainly concerned with the financial management of private profit seeking organization in the fields of services, trade, commerce and other manufacturing concerns.

21. The finance of non-profit organization covers the financial management of private organization the like education, charity and religion.

22. finance can also be classified according to the period of time as under. Short term finance usually supplied for one year or less than one year. Medium term finance, which is issued generally for five to seven years. Long term finance, normally it is issued for a period of more than ten years.

23. FUNCTIONS OF FINANCE Importance of finance is already given in the previous part of this topic. It is due to its functions which it performs in the promotion of trade, commerce and industries. The following are the chief functions and activities which may be taken into consideration for the successful administration of the finance of any organization.

24. Financial Planning Financing Financial Control Financial Planning Financing Financial Control

25. Financial Planning: Financial planning is the act of deciding in advance the financial activities which are the necessary if the business is to achieve its primary goal. It is commonly said as Budgeting which refers to the estimate of future possible income.

26. Financing: Financing means raising the funds in according with the financial plans. It includes the raising of funds, which cannot be obtained by the daily receipts of the business and for this purpose, some other channels must be searched out to meet these requirements, Financial management deals with those channels and instruments by which a needy business may obtain the capital. For the success of any business and completion of production process, adequate supply of capital is very much essential; otherwise it will not be easy to have the desired objectives.

27. Financial Control: This term refers to the checking of the financial activities of the business. Financial control enables the management to see that the disbursement is within the income and capacity and not beyond the financial plan. Financial control is of great importance because human nature is such which always drive away from the original plan. But such small changes can surely cause a great defect on overall purpose of the plan. Moreover, business conditions are not static, they change off and on, therefore, a vigilant control must be exercised on the financial activities of a business organization so that the financial plan can easily be adjusted to prevailing conditions of the business community.

28. Review of statements Cash flow Cash flow Income statement Income statement Financial statement Financial statement

29. Who will be the finance controller

30. Finance controller Board of directors Board of directors Chief executive officer Chief executive officer Chief finance officer Chief finance officer Treasurer controller Treasurer controller Cash and investmentAccounts Capital budgeting Audit Capital structure inventory

31. Business legal entities Proprietorship (80% worldwide) Proprietorship (80% worldwide) Partnership Partnership Corporation Corporation Hybrids (mixed) Hybrids (mixed)

32. Proprietorship One person is the owner One person is the owner Easy to set up Easy to set up Profit goes to one person Profit goes to one person Maximum profit Maximum profit Disadvantages Disadvantages Liability is unlimited Liability is unlimited Limited life Limited life Limited capital Limited capital Single tax Single tax

33. Partnership Multiple partners Set up Set up Capital Capital Profit Profit Limited life Limited life Double tax Double tax Desolation Desolation

34. Corporation Limited company Limited company Unlimited company Unlimited company

35. Internal business environment marketing marketing H.R H.R I.T I.T Finance Finance Logistic Logistic Operation Operation

36. External business environment Competitors Competitors Market Market Customer Customer Suppliers Suppliers Government Government Technology Technology