Finance is the art or the science managing the investments. It deals with the investment portfolios. Finance deals in various fields like cash management, checking the optimal capital structures for different businesses or projects, studying the working capital management of different businesses, investing in shares, controlling the stock exchanges and the cost of capital being employed in the business etc.
Finance operates in different sectors with different motives and different virtues. In a wider sense it operates in 4 areas:
1. Personal Finance: The personal finance deals with the financing issues of a person at a personal level. It deals with various situations like:
Thus the personal finance covers the financial obligations faced by a person on an individual level only.
2. Corporate Finance: Corporate Finance means dealing of the financial issues by a company or a business firm for the proper running of the business or company. Proper professionals are hired to look into this matter. It deals with situations like:
Finance is considered to be the lifeline of any business. If it is not properly managed the business might fail and become bankrupt.
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3. Financial Services: The borrowing and lending money procedure amounts to be an important part of the Finance. When a firm has an excess income i.e. Revenue exceeds expenses; the firm will lend or invest this money to earn some interest. Similarly, if the firm is in losses it will borrow some money from outside to finance its functions. Thus this is a way of financing each other and forms a part of financial services.
4. Public Finance: This area of finance deals with the borrowing of money by the public institutions, government etc. Such finances are for a long period of time and are done from public. The public invests its amount in the organization and reaps back the advantages in form of interest.
Finance sector has been providing services that are crucial for sustaining the business and projects in terms of their feasibility to money. They not only provide the financial status but also try to make out strategies to make the financing better and mitigate any kind of uncertainties.
1. Accounting & Taxing Facilities: The finance sector helps out the firm to keep a track of the accounting books and maintain accounts. These accounts further help in the calculation of the taxes and their proper and timely payment or it may lead to penalty. Thus for filing of returns proper knowledge is required which can only be attained through proper knowledge of finance.
2. Flexibility: The finance is dynamic in nature. It can be varied according to the purpose and needs of the business. The alterations can be made taking into consideration the outer forces which affect the business directly. The flexible business is likely to achieve it objectives because it can mould itself according to the situation.
3. Proper maintenance of records: Proper knowledge of finance provides a better insight to the accounting techniques. The accounting books can be properly maintained which will be helpful for smooth running of business.
4. Sense of Security: The finance sector helps in planning beforehand. It strategizes the plans and prepares the firm against any kind of uncertainties. This brings a sense of security amongst the firm about its sustainability even in hard times.
5. Numerical Data availability: The finance always works with the quantitative data. There is no place for the qualitative aspects in the business. Thus, the quantitative data helps the business to have effective policies.
Therefore, we can see how important Finance is to run a business. For effective management professional finance advisors must be hired who can take the organization to the top.
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