What is Business Finance?
Finance required by the business to establish and run its operations is known as Business Finance. No business can function without an adequate amount of funds for undertaking various activities. To be able to produce goods or provide services, any business needs money. Longer goals of expansion and growth can only be achieved with the help of the required amount of funds.
The financial needs of a business can be categorised into two parts-
- Fixed Capital Requirement: To establish a business, a firm needs to invest money in the fixed nature of assets. Funds are required to purchase fixed assets like Plant & Machinery, Land & Building, Furniture and Fixtures, etc. The funds invested in fixed assets will remain invested for a long period.
- Working Capital Requirement: The funds required for day-to-day business are known as working capital. It is used for holding current assets and paying off the current liabilities of the business.
The amount of Fixed or Working Capital requirement differs from business to business. A business involved in the day to day trading will require less fixed capital but more working capital whereas a business involved in manufacturing will always need to invest more in fixed capital and less in working capital.
Table of Content
- Sources of Business Finance
- Sources of Funds
- Factors Affecting the Choice of the Source of Funds
- Conclusion
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