F.Y.Bcom Entrepreneurship: Financial Management

Financial Management

• Financial management involves optimizing the use of limited financial resources to achieve organizational goals, as resources are always limited but wants are unlimited.

Purpose of Finance

• Finance is necessary for acquiring various assets, including:
  • Tangible assets (e.g., machinery, factories, buildings)
  • Intangible assets (e.g., trademarks, patents)

Definition of Business Finance

• Business finance refers to activities concerned with acquiring and conserving capital funds to meet financial needs and overall business objectives (according to B.O. Wheeler).

Understanding Credit

• Credit is a vital financial concept for business success.
• A good credit rating determines eligibility for financial opportunities, including loans.
• Credit is an abstract representation of financial responsibility, and it's essential to maintain a strong credit score.
• Building credit takes time, especially for first-time entrepreneurs with limited financial history.
• Strategies for building credit include:
  • Consistent credit management
  • Avoiding errors that could damage credit
  • Monitoring credit scores regularly
  • Setting up auto-pay for bills to avoid late payments
  • Avoiding ventures with high interest rates
• Alternative options for obtaining capital exist for those without ideal credit ratings.

Learning How to Budget

• A company budget should provide a comprehensive picture of finances.
• Accurate and regular financial record-keeping is crucial for business survival.
• Companies should:
  • Keep accurate financial records
  • Review financial records regularly
  • Ensure complete financial transparency.