Finance is the life blood of any business. As like without blood a human being cannot survive similarly without finance a business survive or run. Finance is aptly called as the science of money. It is the study of the principle and the methods of obtaining control of money from those who have saved it and administration for those whose control it passes to.
Traditionally the literature of business finance has emphasized that finance is either the management of working capital or the acquisition of funds. The principle of business finance is applicable to small and medium firms as well as for large firms. The business finance deals with the raising, administering and disbursing funds by the business units. Finance helps business entrepreneur and management in getting over their business problems and accomplishing their goals of wealth maximization. Knowledge of finance basis for making decision in all business matter. One such very important matter pertains to investment. An entrepreneur has to decide as to what capital expenditure the enterprise should make, what volume of funds should be raised and flow funds should be allocated to various investment outlets. With the help of capital budgeting, simultaneous and sensitively techniques the management can gainfully choose the most viable project the maximum result (profit) coupled with minimum risk.
The management also faces formidable problem of allocation of funds as among cash, receivable and inventories because they have to strike trade-off between two conflicting but equally important goals of the business. Higher the relative shares of the liquid of cash drain, other things being equal. However the profitability in that case will be less.
Besides dealing with day to day business problems, finance provides to the management such tools and techniques as are of considerable help in dealing with the episodic problems such as problems of re-organization, merger, consolidation and liquation.
[...] Direct Wages Note : The average credit period for the payment of wages approximate to half a month in the case of monthly wages payment . Overheads The amount of overhead may be separately calculated for different typed of overheads. In the case of selling overhead, the relevant item would be sales volume instead of production volume. Importance of Working Capital The importance of working capital in a business need not be over- emphasized. It is the life blood of the business. A firm with inadequate working capital stumbles in its running and soon comes to stand still. [...]
[...] Inspection and testing is carried out for input, in-process and finished products wherever applicable. Inspection report and test certificates are issued for finished product. Product are released for dispatch only after getting test certificates for RC&RD. Control of Non-Conforming Products Product which are not conforming to the planned requirement are identified, segregated and controlled to avoid inadvertent use . The following records are maintained by as evidence of achievement of required quality Inspection records of Raw Materials Inspection & Test records of Critical input Final Inspection & Test results of products Test certificates issued to the customer Analysis of Data Data relating to process performance are product conformity, customer satisfaction, suppliers' data, audit reports are identified, collected and analyzed to assess the effectiveness of the QMS and find out opportunities for improvement of the QMS. [...]
[...] The set of condition on the basis of which budget has been prepared may not hold well now. So budget may have to be revised according to the changing circumstances. This will require further deliberation on the part of management. This may prevent the management form devoting the required time and energy to actual operation. Implementation Preparation of budget will be of on use unless it is properly their consciousness in its utility and their commitment to reach the target set before them. [...]
[...] Absolute Cash Ratio We have considered working capital and different related ratio of sales as a whole and separately for 3 plants and other private companies . We have seen that working capital is positive in all cases except ISP is not well enough to pay its current liabilities. But the volume of working capital apparently volume of business may be different for different plants. Here comes the importance of computing current ratio and liquid ratio. In the same way we have current ratio for which the standard is 1:2. None of the plants in our consideration has reached the standard. [...]
[...] There are : Setting clear goals to be achieved i.e. organization objectives. Spelling out duties and responsibilities of employees to achieve the goals i.e. planning Making the individual's plans compatible with that of others towards achieving the organizational objectives i.e. coordination Ensuring that actual performance conforms with plan i.e., control. Meaning of Budget A budget is a blue-print of plan of action to be followed during a specific period of time for attaining some decided objective. According to CIMA Official Terminology budget is plan quantified in monetary terms prepared and approval prior to a defined period of time usually showing planned income to be generated and or expenditure to be incurred during that period and the capital to be employed to attain a given objective” The analysis of the above definition shows following elements in the budget : It is a plan expressed in financial terms for attaining some objective. [...]
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