“Finance ka ek hi asli maqsad hai, dost—paise ko aise jagah lagana, jahan se faida bhi ho aur risk bhi kum! Cash flow, profitability, growth—sab ka hisaab kitaab tabhi sahi chalega, jab planning aur execution mile ek saath!
In business, finance is related to cash, banks, loans, investments, forecasting, borrowing, budgeting, savings, etc. Finance is the lifeline of any business, without which a business cannot effectively function. Oftentimes, you are in urgent need of finances and are short of it. In such cases, personal loans in Kolkata at low interest rates help you overcome hurdles hassle-free!
Objectives of the finance function
The objective of the finance function is to arrange funds for the business as required. This function has the following objectives.
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Assessing the Financial Requirements |
It assesses the financial needs of an organization. Finance’s function is to find suitable sources for raising them. The sources should match with the needs of the business. |
Proper Utilisation of Funds |
Though raising funds is significant, their effective utilisation is more crucial. The funds must derive maximum benefit. The returns from use should be higher than the cost. Funds must not remain idle at any point in time. |
Increasing Profitability |
To increase profitability, sufficient funds have to be invested. Proper control should also be exercised to avoid a lack of resources. The cost of acquired funds impacts the profitability of the business. |
Maximising Value of Firm |
The finance function also aims at maximising the value of the firm. It is generally said that a concern’s value is linked to its profitability. |
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Suppose a retail company aims to expand its store locations. It uses the finance function to ensure adequate cash flow, profitability, and risk management. They secured financing through a mix of debt and equity. This helped them optimise inventory management to control costs and invest in new stores. By allocating resources and monitoring cash flow, they expanded by 15% without liquidity issues. This strategy helped them enhance profitability while maintaining financial stability.
 Broad areas of finance
Finance can be discussed under three broad areas, as shown below:
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Personal Finance
Personal finance is understood as the income source for an individual. An individual would receive income from the following sources, as mentioned below:
- Income from Salary
- Income from house property
- Income from Capital gains
- Income from Business or profession
- Income from other sources
Personal finance talks about the way an individual spends earned capital from respective sources. It decides what tax is to be paid for the different kinds of investments.Â
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Business Finance
Business finance finds various ways to borrow capital and its utilisation within the business. It includes operating and marketing decisions taken by the business. Business finance is also responsible for the corporate social responsibility of each business entity.Â
In a larger business, planning and analysing the financial requirements are the critical functions of the financial manager. He/she works closely with the top management of the business. Further, the financial decisions are taken at two levels, as understood below:
- Tactical level: the financial transactions of the business are analysed. After that, the reports are submitted to the financial managers at the next level.
- Strategic level: Data-driven decisions are taken to overcome the financial business needs.
In addition, the finance department of a firm classifies the financial need into three subcategories enlisted as:
- Short term
- Medium-termÂ
- Long term
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Public finance
Public finance includes managing the revenues, expenditures, and loans availed from sources. A country’s financial health is measured through the analysis of the below-mentioned aspects:
- National debt
- Taxation system
- Expenditures
- National budget
- Surplus/Deficit
The revenue of the country is the collection of various taxes and returns on investment. Some of the expenses on which the government spends are medical facilities, healthcare, and salaries for the members. In public finance, the public plays a vital role that is large in terms of influence.Â
ConclusionÂ
In a nutshell, the objectives of the finance function focus on effective financial management ensuring business success. It assists in maintaining sufficient flow of cash, maximising profitability, and assessing risk. Finance’s primary function is to ensure optimal resource allocation. By achieving the required targets, the finance function supports sustainable growth. It enhances shareholder value, promoting the financial health and the organisation’s stability.
