At
this level, one does not expect students being introduced to elementary
business to posses a concise appreciate of the trio concept of finance above.
But the student quite naturally should know and appreciate that finance is
something related to money, how to plan, control, source and use it in business
this level, one does not expect students being introduced to elementary
business to posses a concise appreciate of the trio concept of finance above.
But the student quite naturally should know and appreciate that finance is
something related to money, how to plan, control, source and use it in business
Management
policy is continually directed towards making the best use of funds, bearing in
mind corporate responsibilities to shareholders and others who have invested
those funds and matching the needs of growth by finding additional resources as
and when they may be required
policy is continually directed towards making the best use of funds, bearing in
mind corporate responsibilities to shareholders and others who have invested
those funds and matching the needs of growth by finding additional resources as
and when they may be required
The
need for capital in any organization cannot be over emphasized. Coventry (1970)
posit that a new business must have cash to buy raw materials, obtain the use
of premises, plant, and equipment, pay salaries and wages, meet selling and
administrative expenses and so on, well before it can expect funds to flow back
after the first goods or services have been sold. He says that even then, there
may be further delay before the invoices for hose sales or services are
actually paid in cash. Capital is therefore needed to cover this time-lag
between the initial outflow of funds and the much slow flow of fund back in
again.
need for capital in any organization cannot be over emphasized. Coventry (1970)
posit that a new business must have cash to buy raw materials, obtain the use
of premises, plant, and equipment, pay salaries and wages, meet selling and
administrative expenses and so on, well before it can expect funds to flow back
after the first goods or services have been sold. He says that even then, there
may be further delay before the invoices for hose sales or services are
actually paid in cash. Capital is therefore needed to cover this time-lag
between the initial outflow of funds and the much slow flow of fund back in
again.
Finance
is therefore an essential resource that enables an individual or organization
to carry out its assigned task efficiently and effectively. Financing is
therefore the process, administration and allocation of funds.
is therefore an essential resource that enables an individual or organization
to carry out its assigned task efficiently and effectively. Financing is
therefore the process, administration and allocation of funds.
Azra
Solomon (1969) has pointed out three basic questions which should be answered
in order to carry out the finance functions
Solomon (1969) has pointed out three basic questions which should be answered
in order to carry out the finance functions
i.
How large should an enterprise be and how fast should it grow?
ii.
In what form should it hold its assets?
iii.
What should be the composition of its liabilities
We
have seen that a business is a system. Therefore a business organization as an
open social system is made up of a set of interrelated parts working towards a
common goal or objectives. This means that all he functional areas of business
comprises the individual and groups. The tasks being performed are geared
towards the realization of the goal it has set.
have seen that a business is a system. Therefore a business organization as an
open social system is made up of a set of interrelated parts working towards a
common goal or objectives. This means that all he functional areas of business
comprises the individual and groups. The tasks being performed are geared
towards the realization of the goal it has set.
Hence
Igor Ansoff (1968) posits that a firm has both:
Igor Ansoff (1968) posits that a firm has both:
i.
economic objectives aimed at optimizing the efficiency of its total
resources – conversion process and
ii.
a social or non-economic objectives exert the main body of explicit
goals used by government for guidance and control of the firm
Finance
therefore provides a set of objectives or purpose for the firm to exist – these
are embedded in the various theories of the firm. The often mentioned
objectives are:
therefore provides a set of objectives or purpose for the firm to exist – these
are embedded in the various theories of the firm. The often mentioned
objectives are:
a.
profit maximization objectives
profit maximization objectives
b.
wealth maximization
wealth maximization
The argument
for this stance is that provided by Oyedotun (1988). According to him:
for this stance is that provided by Oyedotun (1988). According to him:
a.
profit maximization ensures economic natural selection and in the end
only the profit maximize will service
profit maximization ensures economic natural selection and in the end
only the profit maximize will service
b.
by pursuing its objective of profit maximization, the business also
maximizes social economic welfare
by pursuing its objective of profit maximization, the business also
maximizes social economic welfare
The
various agreements and theories put forward on these and other issues will be
presented shortly
various agreements and theories put forward on these and other issues will be
presented shortly
Financing
as a business concept is the process of applying funds from whichever suitable
sources to accomplish a given project using other combination of a firm’s
resources to achieve stated goals and objectives
as a business concept is the process of applying funds from whichever suitable
sources to accomplish a given project using other combination of a firm’s
resources to achieve stated goals and objectives
Therefore,
the task of the finance manager is to search for, identify resources of funds
and make intelligent choices of where, how, in what combination and cost to get
funds and make intelligent choices of where, how, in what combination and cost
to get funds to run/execute/finance a given project at hand and the period of
payback to creditors
the task of the finance manager is to search for, identify resources of funds
and make intelligent choices of where, how, in what combination and cost to get
funds and make intelligent choices of where, how, in what combination and cost
to get funds to run/execute/finance a given project at hand and the period of
payback to creditors
Oyedotun
(1988) again, offering insight into the concept of investment, says that
investment decision is perhaps the major area in finance and quite naturally, a
lot of research activities have been done to focus attention on its importance.
He points that investment involves the expectation of some positive rate of
return as a compensation for differed consumption
(1988) again, offering insight into the concept of investment, says that
investment decision is perhaps the major area in finance and quite naturally, a
lot of research activities have been done to focus attention on its importance.
He points that investment involves the expectation of some positive rate of
return as a compensation for differed consumption
Investments
have been classified into three major parts. Some authors only recognize two
given uncertain political system
have been classified into three major parts. Some authors only recognize two
given uncertain political system
i.
short term investment
short term investment
ii.
medium term investment
medium term investment
iii.
long term investment
long term investment
However,
in finance, emphasis is laid on 1 and 2 above. The first has to do with
investment under 12 months and its mainly obtainable in the Money Market. While
long term financing or investment is anything from 12 months upward. Because
investments and project financing are associated with risk factors, care should
be taken to appropriately match these risk factors with the success criteria or
probabilities to see what series of cash inflows and benefits are associated
with the investment and also the timing
in finance, emphasis is laid on 1 and 2 above. The first has to do with
investment under 12 months and its mainly obtainable in the Money Market. While
long term financing or investment is anything from 12 months upward. Because
investments and project financing are associated with risk factors, care should
be taken to appropriately match these risk factors with the success criteria or
probabilities to see what series of cash inflows and benefits are associated
with the investment and also the timing
He
also posit that capital budgeting process ahs been developed for the evaluation
of capital investments. The process he says involves the generation,
evaluation, selection and execution of investment project. The extent to which
the process is followed depends on the importance attached to the investment by
the financial management team.
also posit that capital budgeting process ahs been developed for the evaluation
of capital investments. The process he says involves the generation,
evaluation, selection and execution of investment project. The extent to which
the process is followed depends on the importance attached to the investment by
the financial management team.
