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Written by admin
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Tuesday, 14 November 2006 |
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If you want to start a business you have to realize properly that it can be a time consuming and stressful job, especially in the early years. You have to balance your own needs for your family. You have to analyze all the facts in a methodical manner. Business planning is the application of planning to various aspects of financial function. In general business finance requires the formulation of a financial plan that states the quantum of finance required. A business enterprise requires short-term and long-term capital. The total capital required by a concern is called capitalization. The short-term capital or the working capital is the capital required to meet the day-to-day obligations or the operating expenses. The long-term capital is required to acquire the fixed assets. Generally, on a conservative ground, a portion of the working capital is also met out of long-term capital.
You can collect capital from different sources. You have to cover by a capital structure which is very essential. A considerable share is raised from internally generated funds. The remaining part is raised from outside sources such as issue of shares and debentures and loans. This pattern of financing is known as capital structure. It is designed in such a way to obtain the required amount needed at the lowest possible cost. Once the required amount is raised, then the funds are allocated in the best possible way to obtain the maximum benefits. You can ensure the efficient use of the funds if you will implement proper control systems. The most vital thing to do is to take proper actions at the right time and you should report all-important matters to the top management. The financial reports are analyzed to evaluate the performance of the firm. Business finance also forecasts the extent to which these requirements are met by internal generation of funds and the extent that they will be met from external resources. Business finance helps in establishing and maintaining a system of financial control governing the allocation and use of funds.
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