Meaning of Finance

No activity of business can performed with out the invovement of finance. That is why fiannce' is considered as "Life Blood of Business". Finance holds the key to all business activities.

The Envyclopaedia of Britannica defines finance as " the act of providing the means of payment' Accroding to Paul G. Hasings 'fiananc' is the management of the monetary affairs of a company . Howard and Upton defines fiannace as the management of the flow of cash so that the organisation will have the means to carry out its objectives and at the same time meet its onligations as they become due. Their emphasis is on the liquidity aspect of finance. John Hamption interpreted fianace as the managementof the flow of money . In a modern economy finance may be defined as the provision of money at the time it is needed. Therefore, finance is concerned with every activity, Which involves the use of money

1.Financial Management Introduction

Business is an economic activity which involves the use of economic resources (Machine,material,money,men etc)for the production of goods (refrigerator, tooth paste, soap, truck etc) and services (insurance, banking, communication, transport, etc). These goods and services are expected to be sold a a price which is more than the cost of producing them, resulting in a surplus or profit.

When a business enterprise plans to do any activity, it has to make a market survey to estimate the demand for the product and to estimate the life of the business.

The demand estimate helps in the finalisation of plant capacity(i.e., number of units a plant can manufacture in a specific period of time)or scale of operation. Once the plant capacity is finalised, the area of the site required to construct the business premises(consisting factory buildings, godowns, office building etc)., number or personnel (human resource) required, raw material requirement are estimated, The enterprise finanlises its scale of operations and based on it, the capital (both permanent and working capital) requirement is estimated.

A business enterprise strives to aschieve a surples . To achieve this gaol, an enterprise invest funds in various income earning assetws by obtaining funds from various sources. Thus, the financial function is all about the following activities.

• To determine the funds requirement
• To determine the assets to be acquired
• To determine the pattern of financing the assets.