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WHY IS FINANCE IMPORTANT IN EVERY BCOM/MBA STUDENTS LIFE?

Finance is the basic step that assists the formation of any new businesses it allows businesses to take advantage of opportunities to grow, employ local workers and in turn support other businesses to expand and grow with them. Businesses are all about the strategical use of financial instruments, such as loans and investments. Financial trends also define the state of the economy on a global level, so central banks can plan appropriate monetary policies. Finance is known as the process of creating, moving and using the money, enabling the flow of money through a company in much the same way it facilitates global money flow. Money is created by the sales force when they sell the goods or services the company produces; it then flows into production where it is spent to manufacture more products to sell. What remains is used to pay salaries and fund the administrative expenses of the company.   Things to learn from financial management:

  1. Financial planning: Financial management helps to determine the financial requirement of the business and its concerns and leads to take financial planning more smoothly. Financial planning is an important part of the business concern, which helps in the promotion of an enterprise.
 
  1. Acquisition of funds: Financial management involves the acquisition that is required to handle finance to the business. Acquiring needed funds play a major part in the financial management, which involves a possible source of finance at minimum cost.
 
  1. Proper use of funds: Proper use and allocation of funds lead to improving the operational efficiency of the business. When the finance manager uses the funds properly, they can reduce the cost of capital and increase the value of the firm.
 
  1. Making proper financial decisions: Financial management helps an individual to make a sound financial decision in the business concern. Financial decisions will affect the entire business operation because there is a direct relationship between various department functions such as marketing, production personnel.Business finance creates budgets through forecasting efforts. Budgets are prepared on spreadsheets that contain line items, which represent dollar values for how much money will be budgeted for that particular expense
 
  1. Improve profitability: Profitability purely depends on the effectiveness and proper utilization of funds by the company. Financial management helps to improve the profitability position of the concern with the help of strong financial control devices such as budgetary control, ratio analysis,and cost volume profit analysis.
 
  1. Promoting savings: Savings are possible only when the business concern earns higher profitability and maximizing wealth. Effective financial management helps in promoting and mobilizing individual and corporate savings.
 
  1. Starting capital: Every new venture needs seed and money. Entrepreneurs only have dreams and ideas until they have some capital to put their ideas in motion. Whether its a product or service, they will need a way to create and deliver it, as well as enough money and time to lay the groundwork for selling and establishing important relationships. Most business owners face the critical choice between debt and equity financing. A small business loan leaves you free to own and have absolute control over your company while it also leaves you lasting financial obligations. Equity gives you cash, but you have to share the success.
 
  1. Debt ratios: business is about more than money in your hand. While most businesses have some amount of debt especially in the beginning stages too much debt compared with revenues and assets can leave you with more problems than making your loan payments. Vendors and suppliers often run credit checks and may limit what you can buy on credit or keep tight payment terms. Debt ratios can affect your ability to attract investors including venture capital firms and to acquire or lease commercial space. Study of finance teaches you how to keep a balance in your business and when not to fall under a debt.
 
  1. Payroll: Nothing spells imminent death to a company than being unable to make payroll. Even the most dedicated staff wont stick around long once the paychecks The larger an organization gets, the larger the labour costs. Above all, companies have to ensure they have enough cash on hand to make payroll for at least two payroll cycles ahead if not more. Financial planning to ensure your payroll accounts are in strong shape is essential to the integrity and longevity of your company.
  Functions of finance for BCOM & MBA students:
  1. Cash management: Whos keeping up with the cash? The finance people are. A small business owner always wants to know how much money is in the companys bank account. Its the job of financial managers to make sure the business has enough liquidity to pay its suppliers and employees on time. If cash is getting tight, the people in finance will make arrangements to use the firms bank line of credit.
Conversely, having excess cash sitting idle in a bank account is a drag on a companys return on investment. Financial analysis will spot this situation and will find investments that produce a better return.  
  1. Risk management: Managing a business is definitely a risky thing. An owner has concerns about the direction of interest rates, currency fluctuations, changes in commodity prices and risks that his customers will not pay their invoices. Finance reports monitor these areas and give reports to owners and managers.
Financial management analyses the risks of the international markets check the credit standing of customers goes through the terms of loans from lenders and provides an assessment of the perils in these areas. Nothing is ever for certain, and finance helps put the hazards in perspective. The role of finance in business is indispensable. Business owners use financial data every day when making decisions. They use finance to analyze the present and project the future. Companies cannot operate without the benefits of financial analysis.  
  1. Financial goals and strategies: Every business has a bottom-line because every business has organizational goals. Business finance helps companies define their financial objectives so that they can determine the bottom-line for success. By setting financial goals, a company will know whether they’ve reached the threshold of profitability, or if they are remaining stagnant, because financial strategies tie back to the company’s goals, business finance is tasked with the responsibility of making sure the company has a way of meeting their bottom-line.
 
  1. Forecasting: Harvard University’s financial forecasting guidelines explain that a company’s feat relies on financial forecasts. Forecasting is a type of prediction that calculates what a company’s future financials will look like. Business finance performs financial forecasts to determine things, such as what the company’s sales volumes will be and what kinds of capital expenses they will have. Stakeholders and investors are particularly interested in financial forecasts as this data will inform them of whether a company predicts it will be profitable or not.
Financial risks can be assessed through the use of forecasting techniques. If forecasts do not seem financially promising, financial risk is elevated and stakeholders could withdraw their investments if the return on investment is not in their favor. Business executives may then use forecasts to develop new strategies that might help the company realize more future growth.


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