Business finance is a broad term encompassing issues regarding investments, creation, and management of financial resources. Financial theories that arise include capital budgeting, business valuations, banking, and economic valuation of a company’s ventures. Some of these concepts are often taught in finance departments at Universities. In a broader sense, this can be seen as the philosophy or training associated with accounting principles used by the financial reporting and accounting industries. The basic premise of business finance is the use of funds for the purposes of making a profit. Although different business practices and different goals may require slightly different methods of funding, the ultimate goal remains the same – increasing profits.
Business finance provides managers and owners with information regarding working capital and other aspects of operating cash flows. It facilitates the transfer of financial resources between businesses and between organizations. It also provides information regarding long-term liabilities and assets. This includes financing requirements, including bank loans, merchant financing, purchase of plant and equipment, repurchase of debt securities, assumption of debt, and other types of hedging and offsetting. Major components of business finance include financial statements, credit memos, working capital management, capital budgeting, management of floating capital, business valuation, and business cash management.
As a result of advances in financial information processing, accounting, auditing, collection, and reporting mechanisms, business financing, capital markets, corporate lending, and developing different types of partnership agreements, a wide variety of financial statements can now be produced. Financial statements generally include income statements, balance sheet reports, and statement of cash flows. All these reports are necessary for the preparation of accurate financial reports and for the analysis of the performance of a business. The analysis is made by the company’s CPA. One of the most important aspects of business financing is to calculate the cost of capital. This includes the amortization of capital, which is capitalization of the interest paid on the capital and is done on a monthly basis.