Scope of Business Finance


Scope of Business Finance

Scope means the sphere of research or study that is covered by the subject. The scope of Business Finance is hence the broad scope denoted by this subject. Business Finance studies, analyses and examines wide aspects related to the acquisition of funds for business and allocates those funds. There are various fields covered by business finance and some of them are:

  1. Financial Planning and Control: Any business firm must manage and make their financial analysis and planning. To make these plannings and management, the financial manager must have knowledge about the present financial situation of the firm. On the basis of these information, he/she regulates the plans and managing strategies for future financial situation of the firm with in different economic scenario. Financial budget also relies in these financial plans. Financial budget serves as the basis of control over financial plans. The firms on the basis of budget, finds out the deviation between the plan and the performance and tries to correct them. Hence, business finance consists of financial planning and control.
     
  2. Financial Statement Analysis: Another scope of business finance is to analyses the financial statements. However, it also analyses the financial situations and problems that arises in the promotion of the business firm. This statements consists the financial aspect related to the promotion of new business, administrative difficulties in the way of expansion, necessary adjustments for the rehabilitation of the firm in difficulties.
     
  3. Working Capital Management: The financial decision making that relates to current assets or short-term assets is known as working capital management. Short-term survival is a prerequisite of long term success and this is the important factor in business. Therefore the current assets should be efficiently managed so that the business won't suffer any inadequate or unnecessary funds locked up in future. this aspect implies that the individual current assets such as cash, receivable and inventory should be very efficiently managed. Hence, the efficiency in the management of working capital ensures the balance between liquidity and profitability.
     
  4. Capital Building: Financial decision making related to long-term assets is known as capital budgeting or long-term investment decision.

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  5. Capital Building: Financial decision making related to long-term assets is known as capital budgeting or long-term investment decision. This scope s related tot eh selection of an investment proposal out of the many related alternatives available to the firm. However, the acceptance of the proposal depends on the returns associated with that particular proposal.Here, the capital budgeting technique measures the worth of the investment proposal. This technique studies the method of appraising investment proposals. It also analysis the risk and uncertainty, as the returns from the investment proposal extends into the future. All the returns are evaluated in relation to the risk.
     
  6. Management of Financing: Managing financing is yet another important area of business finance. The management of finance is concerned with the mix of assets or structure of the assets of the firm. As the firm should always pay special attention to it's assets. The firm should properly mix the ratio of debt and equity capital while main investment. As capital structure is the ratio of debt and equity capital. Now, the capital structure consisting of the proper ratio of debt and equity is known as optimum capital structure. Hence, the financial manager should make decision regarding optimum capital structure and the ratio of fund to be raised to maximize the returns for the shareholders.
     
  7. Dividend Management: Business finance also analyses the policies regarding the dividend, depreciation and reserve. every dividend decisions are made on the basis of financing decision of the firm. The firm should decide, how much of profit should be distributed among shareholders as dividend and how much should be retained as earnings. This decision depends on the priority of the shareholders and the investment opportunities available  to the firm. Here, the financial manager should develop a sound dividend policy.

These were some aspects and scopes of Business Finance. Though Business Finance covers a wider scope than this above are limited and important scopes of the field. Some of other scopes covered by business finance are study of regulation and control, study of financial assistance and Income management.