What Is The Concept And Function Of Business Finance?


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Greg Allen answered
Business finance is one of the most important aspects of running a business. The concept is that the business accounts should represent a true and fair view of the position of the business. 
The main functions of business finance are to maximize the wealth of the business, as well as to decide which projects the company should undertake in order to make the most profit, and for the business to be financially viable.
The next function is to decide how any projects will be funded, where the money will come from; will it be from within the company, or will further investment be needed from outside sources such as banks or other lending institutions.
All business models should ensure that they maximize their profits, increase their value and are socially acceptable. Capital should be managed to maximize profits and increase the value of the firm. The least cost to the business when procuring new stock or assets, is vital to the finance model of the business.
When looking to source new income for the business the most likely source is a bank, as the interest rates will be lower than with other financial institutions. If the assets bought help with the amount of income generated by the business then loans can be paid off early, and then all profits earned as a result of the new assets can be pumped back into the business, and this can then be repeated.

Businesses can introduce new products and services on the back of a success, and as long as more money is coming into the business than is being spent, then the businesses finances will remain liquid. This, in turn will enable the business to employ more staff and possibly raise workers' wages which this will have a knock-on effect, as people who are happy in their work tend to be more productive and efficient.

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