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Significance of Finance in the Operation of a Profitable Business

Finance is wholly different from the rest the economy. - Alan Greenspan

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Image Source: Freepik
Image Source: Freepik

Finance is one of the most crucial tools of a business organisation. The continuous level of transaction, cash flow, the monitoring as well as the management of funds can be tackled with the help of finance. The significance of finance in the successful operation of a business organisation is discussed below:  

  • Finance helps the firm to gather the funds, manage the funds as well as carry out proper planning within the firm that is responsible for the successful operation of the organization. The vital goal of financial management is the adequate management of the firm’s resources to fulfill the financial objectives and the goals.
  • Further, it can be said that finance is crucial for the acquisition of the physical resources that are required for the accomplishment of the productive economic activities as well as to carry out the sales function such as sales promotion, the management of the pay levels, the unconfirmed level of liabilities as well as tackling the level of uncertainty. However, with time, the condition of finance can be considered as the essential and the natural function in the daily life of the individual.
  • Finance can also be considered to be more specific when it is related to the management issues such as the owner generated funds that are released through the contribution of the promoters, the funds that are raised and tackled from the equity preferences as well as other shares and the borrowed funds that are generated with the help of loans, overdrafts, and debentures.
  • It can be said that finance confines with a greater approach of management and thus it will help in tackling the assets and the liabilities in an organized way. Generally, there are two types of finance i.e. the debt finance and equity finance. The debt finance is managed through the external sources whereas the equity finance requires investment with one’s own money such as the involvement of the stakeholders as well as the partial ownership of capital.
  • The different types of interconnected areas of finance include the management of the financial status that involves the decisions and the clarifications that are to be made within the organization; the money and the credit market that highlights the business securities and the financial institutions as well as the investment of money that highlights the role of the individual decision-making process and the financial investors.
  • In the present business economy, the entrepreneurs and the small businesses are on the rise that indicates that there should be more positions open for the financial managers  A good business generally generates a higher amount of money and thus it can be managed through the proper level of repayment of the bills, payment of the employee’s salary as well as tackling the employees in the organization. Moreover, the business is considered to improve through the sale of quality products and services. There should be proper attempts made for handling the financial aspects and thus it plays a crucial role in the effective functioning of the organization.
  • Further, finance also assists in the adequate availability of funds that is necessary to fulfill the expenses as well as the purchase of the long-term assets of the company.  It is necessary to check that the organization has a sufficient level of funds that is necessary to be tackled during the period of the financial crisis in an organization.
  • On the other hand, it can be said that the cash flow management system can also be difficult without effective functioning and the knowledge of finance. There should be proper attempts made in yielding the appropriate level of investments and this is possible by improving the effective level of judgment.

With the development of long-term goals, financial planning can be tackled adequately. It is necessary to carry out proper planning at the initial stage and thus it will help in the proper execution of the long-term goals. Thus, it can be said that finances crucial for the effective operation of the business organization.

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