Business finance is the term for various matters concerning the study, development, management, accumulation, disposition, and distribution of capital and other funds. It refers to the process through which financial gain is made by a business in the process of increasing its resources. Some of the fields that business finance touches are: investment banking, merchant banking, credit card banking, payroll administration, real estate and finance, and development finance. As already stated, the field of business finance is very broad. Basically, it covers all the financial activities of a business, whether it is purchasing or leasing, creating or selling, producing, marketing, and distribution.
Business finance has three main categories: private capital – raising, corporate/private borrowing, and government/municipal borrowing. Private capital is raising from one’s own savings, bank loans, or other financial means such as credit cards. Government and municipal borrowing involves the use of capital assets or facilities, such as dams, urban railroads, airports, bridges, toll highways, and power plants. The third category of business finance deals with the uses of financial assets in the production, acquisition, sale, and distribution of products.
In business finances, financial management is an extremely important tool. Proper management ensures that risks are minimized and opportunities are properly grabbed. One must always remember that financial management is the process through which cash flows are balanced, debts are converted into fixed interest, profits are reinvested, and losses are controlled. In order to achieve good financial management, the following things are important: sound knowledge about the various factors affecting the financial markets, experience, expertise, due-diligence, and the right tools. If any of these essential factors are missing, then proper business finance would be difficult to achieve.