The simplicity of pronouncing the information ”Finance” has made some businessmen lost concentration on its importance and value. As simple as it is in pronunciation, is the chief of businesses.
Many experts in the field have many descriptions and definitions for it, but non of them can exhaust the meaning and usefulness of it.consequently, I described it as the provision of fund when and where needed. Its importance and management in a business cannot be over-emphasized. No business venture can exist and survive without funds, I meant adequate funds.
After business incorporation, the business starts existing as an artificial person. In other to continue his existence, Mr. Artificial person will use funds to start his business, to keep it going, viable and liquid, and above all to help it grow. It is important to know the supplies of Finance after we have expanded its importance in the business domain.
Its supplies availability to business venture can be classified into three groups:
(1) short-term supplies of capital; this refer to the funds you can raise and utilize from one day to all most twelve calender months.This is used to run day-to-day business activities and this kind of fund is referred to as working capital. Examples of of the supplies are trade credit, overdrafts, commercial papers, discounting of bills and accrual et cetera.
(2) The short-term supplies of funds cannot satisfy the solvency and liquidity of some organizations, consequently, the providers of funds or the investors agreed to extend the short-term to medium-term supplies of funds. This kind of arrangement are mostly appropriate for long-lasting increase of working capital and the acquisition of assets such as equipment and motor vehicles. Example of the supplies include lease, hire buy et cetera.
(3) Due to incapacitation of both the short and the medium terms supplies to satisfy the task ahead of business organizations, hence, the investors extend term of funds beyond seven years. This arrangement is useful for diversification of business, expansion of business and other capital projects. Example of the supplies are retained earnings, shared stocks, bond, and preferred stock.
This aspect worth a little explanation for the readers to have some understanding of what long-term funds is all about. Bonds are certificates issued by a government or a company acknowledging that money has been lent to it and will be paid back with interest within a stipulated years. Preferred stock is similar to bond but this attract fixed dividend and is issued by companies. shared stock, this is referred to as an ordinary proportion and it attract variable dividend.It is issued by companies. The last but not the least is retained earnings, this is undistributed profit after tax made by a company.
In conclusion, no one can justify the importance, contribution, and supplies of Finance in a business domain.consequently, this article only give us some hints of aforementioned topics in the title and place granted it and its management in an organization as all other business activities ( that is production, marketing, manpower development, and research and development to mention but a view) revolve round it.