Business Finance Perth manages financial resources to acquire, produce, preserve, or expand capital stock at optimum cost. Finance is a vast field having many strands. All these strands have their significance and contributions. As a whole, finance is the science of handling financial obligations of one form or another in a systematic, efficient, and economical manner.
The word “business” itself may be interpreted in different ways. Short for “banking,” business finance is concerned with the operations of banking. In addition, it includes the science of funds management, which includes calculating and projecting the cash flow. Longer-term aspects of the discipline are:
The preparation of financial statements and reports.
Measurement of financial risk.
- Allocation of resources.
- Evaluation of the performance of the business.
The purpose of a business finance manager is to maximize the benefits derived from the business. He should thus plan the financial activities of the company in the long run. Planning has two aspects: the forecasting aspect and the assessment aspect. Forecasting is that branch of business finance that deals with the general direction of the company’s future performance. In this aspect, the manager is looking forward to the range of future prices, sales, production, and operations. On the other hand, the assessment part of business finance deals with measuring the ups and downsides of operations and the determination of strengths and weaknesses.
The management of commercial banks is directly involved in managing the cash flows. This is where the financial transactions take place. Most businesses use financing to purchase raw materials and overheads. Other uses include investing in long-term assets like fixed deposits and commercial real estate. Commercial banks’ loss statement records all the losses in a business’s accounts, which allow the managers to monitor financial operations and prepare reports on future situations.
Every business has a cash flow. Cash is needed to conduct business as well as for meeting short-term liabilities such as rent and electricity. A company must have enough money to run its day-to-day operations without relying too much on loans. A business finance manager must therefore ensure that the bank has enough money to cover these cash needs. Loan repayment can be easy if you have the right financing at hand.
Commercial banks offer two categories of business financing: secured and unsecured. The former involves borrowing money from the bank, which the assets owned by the borrower guarantee. In the latter category, there are no assets to borrow. These two categories differ in the way they bring in cash for a business. For instance, in an unsecured loan, the lender relies on his credit rating, while a secured loan has to be backed by some tangible assets.
Commercial banks lend money either through secured or unsecured business finance, depending on the borrower’s financial position. If the company is in good shape with no significant debts, it is more likely that it will give unsecured finance. However, when the bank sees that the business needs more cash to meet its short-term cash flow requirement, it will consider lending secured finance.
Short-term business finance can be obtained from two sources: either through a credit facility or through a mortgage. Credit facilities are available only to a certain extent, and the loan amount may be adjusted every year to suit the company’s repaying capacity. Mortgage finance, on the other hand, requires a long-term commitment. A mortgage may be granted for a specific period, but the interest rate charged is relatively higher than the rates charged by credit facilities.