Business Finance

Jun 18th, 2015
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Introduction• No business activity can take place without some finance - or the means of purchasing the materials and assets needed before the production of a good or provision of a service can take place.• Finance decisions are some of the most important that managers have to take.

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Chapter 25Business FinanceIntroductionNo business activity can take place without some finance - or the means of purchasing the materials and assets needed before the production of a good or provision of a service can take place.Finance decisions are some of the most important that managers have to take. Inadequate or inappropriate finance can lead to business failure - indeed shortage of liquid funds is the main reason for businesses failing. The range and choice of finance sources is extensive and skilled managers will be able to match accurately the needs of their business for particular types of finance with the sources available.Why business activity requires financeFinance is required for many business activities. Here is a list of just some of the main circumstances in which businesses will require finance:Setting up a business will require cash injections from the owner(s) to purchase essential capital equipment and, possibly, premises. This is called startup capital.All businesses will have a need to finance their working capital - the day-to-day finance needed to pay bills and expenses and to build up stocks.When businesses expand, further finance will be needed to increase the capital assets held by the firm - and, often, expansion will involve higher working capital needs.Expansion can be achieved by taking over other businesses. Finance is then needed to buy out the owners of the other firm.Special situations will often lead to a need for greater fina

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