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Reviewer 3

Business finance involves managing money and financial resources to ensure growth and profitability. It encompasses key concepts such as financial management, capital structure, financial statements, and risk management, while also highlighting the importance of cash flow and investment decisions. Sources of business finance include short-term and long-term financing options, and financial ratios are used for business analysis.

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Nihad Rusdemli
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1 views2 pages

Reviewer 3

Business finance involves managing money and financial resources to ensure growth and profitability. It encompasses key concepts such as financial management, capital structure, financial statements, and risk management, while also highlighting the importance of cash flow and investment decisions. Sources of business finance include short-term and long-term financing options, and financial ratios are used for business analysis.

Uploaded by

Nihad Rusdemli
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Business Finance Reviewer

1. What is Business Finance?


Business finance refers to the management of money, investments, and financial resources
within a company. It involves planning, controlling, and making strategic financial decisions
to ensure business growth and profitability.

2. Importance of Business Finance


✅ Helps businesses manage cash flow and expenses.
✅ Supports decision-making for investments and expansion.
✅ Ensures financial stability and profitability.
✅ Helps businesses secure funding through loans or investors.

3. Key Concepts in Business Finance


A. Financial Management
● The process of planning, organizing, and monitoring financial resources.
● Key Areas: Budgeting, financial reporting, and investment decisions.

B. Capital Structure
● The mix of debt and equity used to finance a business.
● Debt Financing: Borrowing money (e.g., bank loans, bonds).
● Equity Financing: Raising funds from investors or shareholders.

C. Financial Statements
● Balance Sheet: Shows a company’s assets, liabilities, and equity.
● Income Statement: Displays revenues, expenses, and profits.
● Cash Flow Statement: Tracks cash inflows and outflows.

D. Working Capital Management


● Ensures the company has enough short-term assets to cover expenses.
● Includes cash management, inventory control, and accounts
receivable/payable.

E. Investment Decisions
● Businesses must decide where to allocate money for maximum returns.
● Examples: Expanding operations, acquiring new equipment, or launching new
products.

F. Risk Management
● Identifying and reducing financial risks.
● Example: Insurance, diversification of investments, and hedging strategies.

4. Sources of Business Finance


A. Short-Term Financing (For daily operations)
● Trade Credit – Buying goods on credit and paying later.
● Bank Overdraft – Withdrawing more money than available in an account.
● Short-term Loans – Loans repaid within a year.

B. Long-Term Financing (For growth and expansion)


● Equity Financing – Selling shares to investors.
● Debt Financing – Issuing bonds or taking bank loans.
● Venture Capital – Funding from investors for startups.

5. Financial Ratios for Business Analysis


✅ Liquidity Ratios – Measures a company’s ability to pay short-term debts (e.g.,
Current Ratio).
✅ Profitability Ratios – Shows how well a company generates profit (e.g., Return
on Investment - ROI).
✅ Debt Ratios – Assesses a company’s reliance on debt (e.g., Debt-to-Equity Ratio).

6. Role of a Business Finance Manager


Makes investment decisions.
📊 Analyzes financial statements.
💰 Manages cash flow and budgeting.
⚖️Balances risk and profitability.

Would you like me to focus more on any section? 😊

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