What Is Business Finance?
Business finance is the process of organizing, planning, studying, and Managing financial activities within an organization. It entails identifying, studying, forecasting, managing, and investing the company’s financial resources. Thus, it is very crucial for managers to comprehend how business finance works. The main objective of business finance is to maximize the profitability of a firm by minimizing financial risk and maximizing the investment return.
Business finance is a part of corporate management, which regards the financial aspects of a firm’s activities as investments. Some of the areas of business finance that are usually studied include: cash and equivalents, capital budgeting, working capital management, venture capital, financing assets, financial statements, credit lines, mortgage banking, merchant cash advances, and portfolio performance. In addition, different approaches are also applied in business finance such as asset pricing, credit pricing, asset allocation, financial modeling, economic modeling, financial reporting systems, dividend policy, loan pricing, and international financing. Also, other subtopics such as corporate taxation, banking regulations, mergers and acquisitions, business valuations, mortgage banking, private equity, private placement requirements, and venture capital pricing are also included in the curriculum of business finance.
In short, business finance revolves around financial decisions regarding investments, working capital, short-term financing, long-term financing, purchasing decisions, and many more. Business finance also includes all areas of human capital such as skilled and semi-skilled workers, executive officers, managerial staffs, sales personnel, customer care representatives, technical staffs, office staff, warehouse workers, and more. All these people are involved in the process of making business decisions. Thus, business finance helps managers make sound financial decisions. In fact, it is considered to be one of the most important concepts in modern business planning.