Business Finance Grade 12 - Introduction to Financial Management

Study Notes

Financial management is essential for everyone, influencing daily decisions related to money.
Defined as the management of money, banking, investments, and credit, finance connects to business activities involving financial transactions.

Finance incorporates both the science of managing money through factual information and the art that evolves with new business practices.
Key areas of financial decision-making include budgeting and sourcing funds.

Budgeting involves preparing a financial plan reflecting how much to spend and how much to save, relevant to both students and businesses.

Sources of funds can be short-term or long-term.
Common sources for students include parents, friends, and banks, vital for starting a business.

Finance is divided into two primary categories: Private Finance and Public Finance.
Private Finance manages resources of individuals, non-governmental organizations, and private businesses.
- Subcategories of Private Finance include:
  - Personal Finance: Management of individual resources.
  - Business Finance: Oversight of financial assets within a company, focusing on three divisions:
    - Financial Management: Involves capital budgeting and investment decisions aimed at maximizing shareholder wealth.
    - Capital Market: Studies financial institutions' roles in facilitating loans for public and private borrowers.
    - Financial Investment: Concerns business decisions related to stock and bond values.

Understanding the roles in a corporate financial structure:
- Shareholders: Hold voting rights to elect the Board of Directors.
- Board of Directors: Responsible for major corporate governance decisions (to be further discussed).

A finance officer plays a crucial role in overseeing the management, allocation, and utilization of financial resources within a business.
Key responsibilities may include strategic planning, risk management, and ensuring compliance with financial regulations.