Goals and objectives of finance in business

Finance-iACT-GlobalAll businesses in today’s world have one objective in mind – to make money. Irrespective of the size of the organization all businesses are running with the objective of making profits. Goals and objectives of finance in business are to ensure that the organisation achieve its goals of making money by ensuring that the organization as a whole achieve other objectives as well. Other objectives important for the organisation are process, production, people and promotion maximization. Once an organisation ensures that these objectives are met it results in profit for the organisation.

Generally the goals and objectives of finance in business are

Return on Investment- Every business is funded by investment and its imperative for business that the investment grows in the business so that the business can make money. Return on Investment is a financial ratio applied to capital expenditure. The ROI ratio is concerned with two aspects first is the capital investment in terms of property, machinery and vehicles. It’s the objective of the business to generate enough money through these capital investments to justify their purchase cost. Secondly, ROI is also concerned with investments in stocks, bonds and other investment instruments

  • Increasing Revenue Growth – The most basic objective of any business is to increase the revenue. Increasing revenue is achieved by increasing sales and marketing activities. The focus is on top line earnings, which is concerned with earnings before expenses. Most organizations look at setting a percentage increase goal and work hard for achieving that objective.
  • Profit Margins– Profit is concerned with the bottom line earnings. Profit is basically the revenue generated over the sales revenue after deducting the expenses. This Profit can be used to invest in the expansion of the business and also for can be used for distribution among the employees as part of a profit sharing arrangement. Profit goals of an organization are concerned with revenue making sure that the cost are kept low by acquiring raw material at lower price or keeping the cost of production low in order to increase the profit margins.
  • Sustainability – Its also an objective of finance in business to sustain itself in times of economic crisis and turbulence. This objective can be achieved by keeping the debts really low and maintaining consistent income levels.

iACT Global is a education and training organization which helps businesses in achieving financial goals and objectives by providing various Financial management courses which can contribute to long term growth oriented strategy for the business. Enroll now!

Financial Risk and its Types

financial risk management One of the major concerning factors for all types of businesses across the world is financial risk management. This is the main reason behind the popularity of the Financial Risk Manager Exam. If you are also keen to take this exam, you must know about what is meant by risk and what its various types are. Hence, let’s study about financial risks and its type through this blog.

Definition of Financial Risk

You must be aware that risk can be defined as the possibility of having negative or unexpected results. A firm may have to tackle different types of risk. Broadly speaking, there are three types of risks: financial risk, business risk and non-business risk.

In this blog, we will focus only on financial risk. For every business, financial risk is the highest priority risk. Market movements are the main cause of financial risk. If you enroll at IACT Global for Financial Risk Management course, you will come to know more about these market movements. There are different types of financial risks like credit risk, operational risk, market risk, legal risk and liquidity risk. Let’s discuss each one of them in detail.

  1. Credit Risk: When you fail to complete counter parties’ obligations, this gives rise to this kind of risk. Credit risk can be further divided into:
    • Sovereign Risk: This risk is caused due to tough foreign exchange policies.
    • Settlement Risk: This risk is caused due to failure of a party to meet its obligations while the other party makes timely payment.
  2. Operational Risk: This risk is caused due to technical failures or mismanagement. It is divided into
    • Fraud Risk: This arise due to absence of controls
    • Model Risk: This is caused due to wrong model application.
  3. Market Risk: Price movements cause this type of risk. Market risk can be further classified into:
    • Directional Risk: This risk is caused due to movement in interest rates, stock price etc.
    • Non-Directional Risk: This risk includes volatility risk.
    • Legal Risk: This risk is caused due to lawsuits and legal proceedings.
  4. Liquidity Risk: This risk is caused when you are unable to implement transactions. It is of two types:
    • Asset Liquidity Risk: This risk arises when assets are converted into cash during sudden cash requirement.
    • Funding Liquidity Risk: This is caused due to daily cash flow.
    • After going through these risks, you must be keen to take up the Financial Risk Management course. You can easily register at IACT Global and get Financial Risk Management certification. At IACT Global, you can pursue learning anywhere, anytime.