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.