Business Finance : Meaning, Need and Importance Business finance ?

1. Business Finance : Meaning, Need and Importance Business finance refers to money and credit employed in business. It involves procurement and utilization of funds so that business firms may be able to carry out their operations effectively and efficiently. The following characteristics of business finance will make its meaning more clear:-

 (i) Business finance includes all types of funds used in business. 

(ii) Business finance is needed in all types of organisations large or small, manufacturing or trading

. (iii) The amount of business finance differs from one business firm to another depending upon its nature and size. It also varies from time to time. 

(iv) Business finance involves estimation of funds. It is concerned with raising funds from different sources as well as investment of funds for different purposes.

 Need and Importance 

Business finance is required for the establishment of every business organisation. With the growth in activities, financial needs also grow. Funds are required for the purchase of land and building, machinery and other fixed assets. Besides this, money is also needed to meet day-today expenses e.g. purchase of raw material, payment of wages and salaries, electricity bills, telephone bills etc. You are aware that production continues in anticipation of demand. Expenses continue to be incurred until the goods are sold and money is recovered. Money is required to bridge the time gap between production and sales. Besides producers,

 1:: Business Studies may be necessary to change the office set up in order to install computers. Renovation of facilities can be taken up only when adequate funds are available. 

2. To meet contingencies Funds are always required to meet the ups and downs of business and unforeseen problems. Suppose, some manufacturer anticipates shortage of raw materials after a period. Obviously he would like to stock raw materials. But he will be able to do so only when money would be available. 

3.To promote sales In this era of competition, lot of money is required to be spent on activities for promoting sales like advertisement, personal selling, home delivery of goods etc

4. To avail of business opportunities Funds are also required to avail of business opportunities. Suppose a company wants to submit a tender but some minimum amount is required to be deposited along with the application. In the case of non-availability of funds it would not be possible for the comp