Finance function is a separate functional area of management like production, marketing, personnel etc. No doubt, production and marketing are the basic sub-systems of a business system but finance sub-system is of strategic importance because their success depends directly upon the efficient operation of finance sub-system. Finance function is so closely inter-related with the other sub-systems of a business system that it is almost impossible to segregate it from the general business management. In fact, so closely are the financial matters of a business system associated with the plans and results of every other department that in a sense, every proposal and every decision involving financial problems has a bearing on financial results. It is precisely due to the ever increasing importance of finance function in the business that the role of the finance manager is undergoing a constant change and the scope of finance function has broadened beyond recognition.
Earlier finance function was concerned with procurement of funds, hence all the earlier studies were confined to sources of raising finance and the institutions involved in raising finance. Finance was defined by Paish as the provision of money at the time it is wanted. Now it is well recognised that procurement of funds, though an important aspect, covers, only a part of the finance function. The other important aspect is the wise-use of funds procured for business.
2. Wheeler : Business : An Introductory Analysis.
1. Guthmann and Dougale : Corporate Finance Policy.
The primary objective of any business is to earn sufficient profit to pay a reasonable return to the investors and also to retain a part of the profit for ploughing back into the business. So the scope of finance function not only covers the task of fund procurement but also the most suitable allocation of funds so as to maximise the profits. In the words of Guthmann and Dougale. “Business finance can broadly be defined as the activity concerned with the planning, raising, controlling and administering of funds used in the business”.