Business Finance Chapter 1

Finance officer

acts as the wary financial traffic officer to almost all business transactions with monetary considerations he or she is also expected to be the "shock absorber" of budgetary requests and requirements of other functional units of the business. Is primarily responsible for managing the finances in the organization The professional judgement of this person in routine and occasional transactions is the product of his or her varied expenses and strong educational background in accounting, economics, and even operation science

Operating decisions

are financial decisions affecting the routine operating activities of a business. It is directed towards providing immediate solution to the concerns of the functional areas of the firm such as manufacturing, marketing, purchasing, and the like.

financial investments

are resources that are expected to provide income and achieve appreciation or growth of the business

Economics

as a social science, it is concerned with the efficient utilization of scarce resources to satisfy human needs and wants

system

connotes that the financial activities of the business are properly coordinated with the whole structure

allocation

connotes the wise distribution of financial resources to the different functional areas, the proper assignment of funds between current and non-current assets, and the correct sourcing of funds based on the concepts of risk and return

investment decisions

deal with choosing small and large projects with several investment opportunities, the different projects are critically evaluated in terms of return of investment and expected cash flows. However, these are made only when investment opportunities come.

financing decisions

deal with raising or acquiring of funds from outside sources and not from the ordinary results of the business operation. In other words, financing decisions are made when the business needs to borrow money.

financial management

focuses on capital budgeting decision or investment decision on the acquisition of assets and its corresponding financing chem. This area of finance answers the following questions: What kind of asset shall be acquired? What type of financing scheme shall be used in the acquisition of the asset?

financial investment

includes business decisions about the value and price of stocks and bonds, portfolio analysis, market analysis, security analysis, and behavior of the investors.

personal finance

is a sub-category of private finance which is directed towards the management of personal resources of an individual. The income of an individual is sourced from compensation, exercise of profession, or business income as a sole proprietor.

income

is allocated based on the individual's personal needs such as household expenses, education, hospitalization, and acquisition of personal and real properties.

capital market

is an area of business finance that studies the different financial institutions and their functions that provide assistance to both private and public borrowers of funds. It also includes the study of cost of borrowing the funds such as interest and other financing charges

Business finance

is an area of finance that focuses on the handling and management of financial resources of business organizations. its three major divisions are financial management, capital market, and financial investment

accounting

is an art of recording business transactions and deals with the preparation of financial statements. It is considered as the language of both business and finance

public finance

is the allocation of government income generated from either taxation or borrowings and the covenant expenditure based on the approved national and local appropriation or budget. It is also termed as fiscal administration.

private finance

is the management of financial resources of private individuals, non-government organizations, and private organizations in accordance with the prescribed financial policy and priority of the business organizations.

fundamental concern of finance

is to ensure that the limited financial resources are correctly managed, allocated, and utilized in order to achieve the financial goal of a business

management

it implies the efficient handling of business resources, particularly that are financial in nature

Finance

it is defined as both a science and an art of correct application of the economic and accounting concepts and principles that define the system, structure, and process of management, allocation, and utilization of financial resources, investments, and expenditures.

financial expenditures

of a business may cover the operating expenditures and the capital expenditures

financial resources

refer to the funds of a business which are provided by the owner or by the creditors

Finance division

usually headed by the chief finance officer and handles the following: -Accounting function -Treasury function

Operating division

usually headed by the chief operating officer and handles the following functions: -Marketing -Production and Operations -Human Resource