Financial Management – Concept

Finance is the life blood of any business. Business may be big or small, finance is needed, the only difference is the amount of finance required. Small sized business is invariably financed out of the personal savings of the businessman. But after the industrial revolution the size and complexities of business increased tremendously, making impossible for a sole trader or partnership firms to finance such large sized ventures. Joint stock companies filled this gap and made possible to collect huge funds from a large number of persons and that too with their liability limited. “The joint stock company form has proved a flexible and valuable instrument. It joins the venturesome and the countious, the wealthy and the penniless, the capable and unskillful, the energetic young and retiring old into a system of contractual relationships which make it possible for each to make the most appropriate part in those gigantic business enterprises  which strech across the continents and overseas1.” In our study of financial planning, we shall primarily refer to the financial planning of joint stock companies because this form of business organisation dominates the industrial world.

Business finance simply means the provision of money when it is required. In the present money- oriented  economy, we simply cannot imagine any business without money. It has been rightly remarked by someone that money is needed to earn money but in order to earn money, the money invested must be well managed. That is why Wheeler defined business finances as that activity which is concerned with the acquisition of capital funds in meeting the financial needs and overall objectives of the business enterprise

Leave a Reply

Your email address will not be published. Required fields are marked *