Finance function
- 1. Finance Function Submitted By Ajith Thambi
- 2. Definition of Finance Function • According to R.C.Osborn : The Finance function is the process of acquiring and utilizing funds of a business. Financing consists of raising , providing , managing of all the money , capital or funds of any kind to be used in connection with the business .
- 3. Finance function has classified into two. • Long-term financial function (decision) • Short term financial function(decision)
- 4. Long-term finance function 1. Financing Decisions – These decisions basically deal with acquiring funds & deployment of funds 2. Investment Decisions – These decisions are related with selection of assets . Assets are classified into two types – Fixed Assets - Current Assets • The decisions regarding Fixed Assets are known as capital budgeting decisions • The decisions regarding current assets come under Working Capital Management
- 5. Capital budgeting decision involves of allocation of capital of funds to long term assets that would yield benefit in the future The evaluation of prospective profitability of new investment The measurements a cut off rate against which the prospective return of new investment could be compared
- 6. 3 Dividend Policy Decisions – Whatever profit company earns , the owners are entitled to receive them. These decisions are related with distribution of dividends i e to decide how much profit we should distribute as dividend & how much should be retained in business
- 7. Short-term finance function • Liquidity Decision Investment in current assets affects the firm’s profitability and liquidity. Current assets management that affect firms liquidity is yet another important finance function. Current asset should be managed efficiently for safe the firm against the risk of illiquidity
- 8. 3 concepts of finance function in relation to business 1) Provide funds needed by the enterprise in terms that are most favorable the light of its objectives 2) Concerned with everything that take place in the context of a business directly or indirectly as mean in cash 3) Concerned with procurement of funds and its effective utilization in the business.