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.

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Corporate Finance: Nature and Scope

CF_iACT_GlobalMost of you, who are familiar with Corporate Finance, must be aware that corporate finance is nothing but managing the required funding and its sources. CF is also concerned with overseeing and optimizing the proficiencies of the capital structure to enhance the value of the company. One of the main objectives of corporate finance is to maximize the shareholder value in both short and long term. Let’s find out about the nature and scope of CF.

Scope of Corporate Finance

Capital investment decisions are an important part of corporate finance. These decisions include

  • Deciding whether the dividends should be offered to shareholders or not
  • Sanctioning or rejecting proposed investment. If the investment is approved, it is also to be decided whether the company should pay with debt of equity or both.
  • Managing of short term assets and liabilities, investments, inventory control and other short term financial issues by the financial manager

Corporate finance understands the financial problems of a company and prevents them beforehand. It also deals with the financial aspects, promotion and administration of new enterprises.

Nature or Principles of Corporate Finance:

Corporate finance is based on the following three principles:

  • The Investment Principle: According to this principle, the funds of an organization should be invested in such a way to derive maximum return on investment. This investment should be made at acceptable and minimum hurdle rate which depends on the project’s debt and equity. The riskier the project is; the higher will be the hurdle rate.
  • The Financing Principle: According to this principle, one should choose the ratio of debts and equity in such a way so as to attain maximum return on investment and to match the assets’ financial nature. The corporate finance manager has to analyze how to attain the optimum financial mix of debt and equity for the organization.
  • The Dividend Principle: According to this principle, when a business reaches a saturation point where cash flow surpasses the required fund, the corporate finance manager needs to search for alternative sources like dividends, stocks and assets to maintain a balance between the cash flow and required funds.

Thus, after knowing so much about CF, you must be more than eager to enroll for CF Certification at iACT Global. iACT Global is just the place for your dreams to come true. Through iACT Global you can study at your own convenience anywhere and at anytime. So, just enroll now!