Gem International Corp

Oct 17

What you should know about Finance in Business

Finance in business encompasses various activities revolving around the money management and other value assets.

All businesses need finance to pay for overhead transactions as well as day to day variable expenses.

A new business requires huge amount of finance to buy assets, pay rent, buy stocks as well as pay overhead expenses. Finance used to start a business is called start-up capital.

Expanding business also need more finance to buy more fixed assets, fund a takeover, among other internal expansion activities such as developing new products.

In case of a loss-making business, finance is necessary to acquire more efficient machines and also cover up negative cash flow. However, it is very difficult for a loss making organization to obtain finance from a financial institution.

Business can be financed through different means, which features different advantages and disadvantages.

The most common methods of financing businesses involves taking advantages of credit arrangement offered by financial institutions. Financial institutions such as banks are in the business of financing other businesses.

They have advantageous arrangements that offer capital to other businesses, investors, and consumers, which can help them, achieve their goals.

Properly managed debt is vital for both small and large business as it ensure steady and rapid expansion of business.

Bank loans and credits are designed to allow borrowers with well established reputation to access larger amount of finance at lower interest-rates, which is friendlier for a prosperous business.

Business owners need to find a way and work hard to build credit scores for their companies.

Choosing for a more reliable financial institution, getting financial advices from the financial institution, and repaying loan and credits in time are the main ways of improving credit score. Finance in Business

There are different ways of accessing equity financing. Investment from different venture capitalist can provide influx of capital and expert finance guidance for a start up business.

Established businesses have better ways obtaining finance. For instance, they can incorporate more share holders by selling shares to raise large amount of debt-free capital.

This is done through legal dilution of business ownership among many share holders.

Wise financial decision is vital for any financial investments as wise financial investments results in profitable investments and prosperous financial operations.

Taking financial advise from expertise and Investing in more conservative ventures such as interest-bearing bank deposits, blue-chip bonds, trusted dividend-paying stocks, assist businesses to diversify their income, hedging themselves against risk in the marketplace.

…

Finance is something that touches on the lives and activities of everyone.

Having a basic knowledge of financial concepts can come in handy not just in daily life, but also in career.

Finance and accounting are closely related and should be taken together. The later takes are of recording and reporting on the economic condition of various entities.

On the other hand, finance is the function which makes use of the recorded information from accounting so as to make decisions such as hoe to utilize available resources most effectively or even raise additional funds.

So, in at least one sense of the word, finance can be said to be a future-looking concept which makes use of past data in order to make decisions.
There are three major financial statements in finance, a balance sheet, the income statement and statement of cash flows.

It communicates the net income of a company which is defined as revenues less expenses for a certain period of time.

It has various components such as gross margin, operating earnings, earnings before income tax, net income and significance to investors.
Another concept is the balance sheet which summarizes what a financial entity owns and owes.

It can be used as a measure of net worth and describes a figment of the financial position of a company at a certain point in time.

The components of the balance sheet are assets, liabilities and the equities of shareholders.
Last but not least is the statement of cash flows which simply outlines the flow of cash into and out of a business over a given period of time. Finance Concepts for Beginners (3)

It reflects the liquidity of a firm or its ability to use cash in order to settle outstanding liabilities.The components of this statement are cash from operating activities, investments, financing activities and its significance to investors.

All of the above financial statements are usually made available to the public via annual reports, 10-Qs and 10-Ks. The annual report is an obligation for public companies to provide to their shareholders including information on their financial conditions, operations and management.

Now you have it, a simple beginner introduction to finance which can be a basis for further reading, research and development.

Hopefully, the information provided here will be enough to give you a glimpse into the world of financing and how big companies make and use their funds.