Beruflich Dokumente
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Chapter 1
Mah-a-Mobeen Ahmed
What Is Finance?
Finance is the study of how and
under what terms savings (money) are
allocated
between
lenders
and
borrowers.
Finance is distinct from economics in
that it addresses not only how
resources are allocated but also under
what terms and through what
channels
Financial
contracts
or
securities
Business Finance
Business finance is concerned with making
decisions about which investments the business
should make and how best to finance those
investments.
Financing and managing the resources of a
business.
Businesses are, in effect, investment agencies
or intermediaries.
public
investors
Financial
Institutions
Provide
funds to
busines
s
Money
Busines
s raise
money
Invest
Money
investe
d
Manage
rs
acquirin
g
financin
g
managi
ng
Business
assets
Corporate Finance:
.Involve financial management of business
entities.
Investment:
.Involve the allocation of funds once they have
been acquired.
Financial Decisions
The major financial decisions made by the
Investment decision:
Managers consider
the amount invested in the assets of the business
Composition of the investment
Investment in assets are important
decisions.
Decisions regarding the investment in non
current assets have long term effects on
profitability of businesses.
Managers also ensure that investment in current
assets are at appropriate level.
The
investments
criteria:
must
meet
three
main
Financing decision:
After the investment decision(amount and
composition of investment), managers have to
decide how to finance them.
It involve generating funds internally or from
source external to business.
External source of funds:
By issuing debt
By issuing equity securities
The