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    Introduction to Business Finance: series 1, #1
    Introduction to Business Finance: series 1, #1
    Introduction to Business Finance: series 1, #1
    Ebook150 pages55 minutes

    Introduction to Business Finance: series 1, #1

    By OwlMaster

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    About this ebook

    Introduction to Business Finance is a comprehensive e-book designed to demystify the principles and practices of financial management for aspiring business professionals, entrepreneurs, and students. In this guide, readers will explore foundational concepts that govern how businesses manage their finances, from budgeting and capital structure to investment analysis and risk management. Accessible yet thorough, this e-book offers a clear roadmap for understanding the complexities of business finance, equipping readers with the tools to make informed financial decisions in a business setting.

    The e-book begins by introducing the basic functions and goals of finance in business, providing a fundamental understanding of what financial management entails. It covers essential topics like the importance of financial planning, the role of finance in corporate decision-making, and the impact of financial activities on the overall success of an organization. As readers progress, they'll gain insights into financial statements, including balance sheets, income statements, and cash flow statements, learning how to interpret and analyze these documents to gauge a company's performance.

    One of the key features of this e-book is its focus on financial analysis, which is a crucial skill in business finance. Readers will learn techniques to evaluate a company's financial health through ratios and performance metrics, understand liquidity, profitability, and solvency, and grasp the importance of benchmarking against industry standards. Real-world examples and case studies illustrate how to apply these concepts in practical scenarios, enhancing readers' analytical skills.

    Additionally, Introduction to Business Finance delves into investment fundamentals, providing guidance on evaluating potential projects and determining their financial feasibility. Readers will explore methods such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period to assess investments and understand the factors influencing these decisions. This section emphasizes the importance of aligning investment choices with a company's financial goals and risk tolerance.

    Risk management is another crucial aspect covered in the e-book, teaching readers how to identify, assess, and mitigate financial risks. This part introduces different types of risks, including market, credit, and operational risks, along with strategies to manage them. Understanding risk and reward is a key concept, and this e-book explains how to balance potential gains with the inherent risks of business activities.

    To round out the basics, Introduction to Business Finance includes sections on financing options available to businesses, such as debt and equity financing, crowdfunding, and venture capital. It also explores the concept of capital structure, and the factors businesses consider when choosing between different sources of financing. Readers will gain insight into the cost of capital, capital budgeting, and the importance of maintaining an optimal balance between debt and equity.

    Each chapter of this e-book is designed to build upon the last, creating a structured and progressive learning experience. By the end of the book, readers will have a holistic view of business finance and will be equipped to understand, analyze, and apply key financial principles in a business context. Whether you're a student looking to deepen your knowledge, an entrepreneur seeking to make sound financial choices, or a business professional aiming to enhance your financial acumen, Introduction to Business Finance provides the knowledge foundation needed to navigate the world of business finance with confidence.

    LanguageEnglish
    PublisherOwlMaster
    Release dateOct 28, 2024
    ISBN9798227929853
    Introduction to Business Finance: series 1, #1

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      Book preview

      Introduction to Business Finance - OwlMaster

      UNIT 1 NATURE AND SCOPE OF FINANCE

      1.0 Introduction to finance

      Finance plays a very important role in any business activities, whether public or private sector. Its management is the pillar upon which all economic activities stand. No business can survive or be sustained without finance.

      In this first unit of this course, we will you will be introducing the nature of finance in a buy & sell enterprise, define finance; explain the role and field of finance.

      At the end of this unit, you should be able to:

      • discuss the nature of finance

      • define finance

      • Identify the role finance.

      1.1 Nature of finance

      Finance may be defined as the provision of money at the time it is required. Every person responsible for finance, whether it is for a corporate organization or private household, money is confronted with prospects of inflow receipts on the one hand, and outflow payments on the other. The inflows are expected to be arranged in such a way that fund (money) is always available to make necessary payments as they arise.

      1.2 Finance defined

      Oyekanmi (2003) defined finance as money affairs or money matters. All forms of money or near money e.g. debt, cash equity certificates would be implied. In certain usage, however, not only are liquid funds subsumed in the term finance, but all forms of assets, which are capable of being expressed in monetary terms.

      On the other hand, Anao (1993) defined finance as money affairs or money matters. All forms of money or near-money such as debt, cash equity, certificates of deposits would be implied. In certain usage, however, not only are liquid funds subsumed in the term finance, but all forms of assets, which are capable of being expressed in money terms.

      According to Hornby (2001), finance is the money need or needed to support an activity, project, programme etc. and or the management of money.

      1.3 Evolution of finance

      Finance evolved from economics as its branch in the early part of the 20th century; but later became a separate discipline. It graduated in response to the complexity of business from sole proprietorship to corporate organization. Finance was initially concerned mainly with the keeping of records of receipts and payments; dealings simply on bonds, debentures, banks. Nowadays, it has extended the ‘coast’ to various aspect or aspects of company survival, introduction of new technologies in operation, the application of computers and its closeness to economy.

      1.4 Field of finance

      The field of finance originally covered mainly:

      • Instruments of finance (e.g. bonds, debentures etc.)

      • Institutions / intermediaries (e.g. banks, finance coys etc.)

      • Capital markets (e.g. exchange etc.)

      The finance is related to economics as every individual, organizations and government operate within the economy. So understanding economic setting is paramount to you. You need the knowledge and alertness of each level of economic activity and the related consequences.  It is associated with accounting as both are interested in cash flows and accounting and financial data necessary for taking basic decisions.

      1.5 Role of finance

      Without money (finance), an enterprise cannot function; hence, understanding the role of finance and its ability to measure the progress of a business is essential for effective management. Finance can be likened to a lubricant. Too little of it (finance) can make a business grind to a halt; while too much of it may lead the business having to grapple with all types of projects not minding their usefulness.

      1.6 Common Denominator of finance

      Money is the common denominator for the full range of activities performed in the business. Yes, there are other factors which are common to business like man- hours, which are all the same length but don’t have the same value in term of quantity of work done or skill and expertise displayed. Money also presents its problems, particularly when inflation sets in, resulting in changes in the purchasing power of a unit of currency. This notwithstanding, for the moment, this fact has not affected its role as a common denominator, so long as it remains the medium in which business is conducted.

      1.7 Inter-relationship and transaction

      Money is the medium of exchange in business; the other two elements are production/operation and marketing. All these three must be held in balance to enable optimum utilization of the resources of the enterprise.

      According to Jones (1976), the initial investment of cash (money) in figure 1 above, is shown to provide the means whereby the entrepreneur or promoter of the business enterprise can purchase those assets which enable the business to have premises, equipment, transport and other items required before the activities of the organization can take-off.

      The investment must also be

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