Nature and Aims of Business

Nature and Aims of Business

• Businesses are key drivers of market innovation, introducing new products and services.
• Basic necessities like food and shelter are continually provided by businesses.
• Business operations contribute significantly to the economic development of a country.
• Business is defined as a lawful economic activity focused on profitability through the production and distribution of goods and services.

Kinds of Business

• Commerce: Involves trading, merchandising, and marketing activities.
• Industry: Encompasses various sectors including genetic, extractive, and manufacturing industries.
• Services: Covers sectors such as recreation, personal services, and finance.

Objectives of Business

• Profit generation is the primary aim of any business.
• Other objectives may include gaining political influence, maintaining family control, and fostering community involvement.
• Key goals include:
  • Providing products and services to the community.
  • Meeting personal objectives like profit for owners and adequate compensation for employees.
  • Protecting and enhancing human and physical resources.

Fundamentals of Finance and Financial Management

• Finance is the management of money, involving activities such as investing, lending, borrowing, budgeting, saving, and forecasting.
• Financial management focuses on planning, organizing, directing, and controlling an enterprise's financial activities.

Role of a Financial Manager

• Financial managers are responsible for raising funds through equity and debt.
• Optimal allocation of funds is critical, requiring consideration of:
  • Firm size and growth potential.
  • Asset status and the methodologies for fund procurement.

Financial Institutions

• Financial institutions offer diverse services, including banking, insurance, and investment management.
• Types of financial institutions include:
  • Depository Institutions: Accept deposits and provide loans.
  • Non-depository Institutions: Do not take deposits but offer financial services.

Financial Instruments

• Represent legal agreements that involve monetary value and create financial assets and liabilities.
• Common financial assets include:
  • Cash and equivalents, accounts receivable, notes receivable, and investments.

Financial Liabilities

• Include various obligations such as:
  • Payables, lease liabilities, redeemable preference shares, and security deposits.

Equity Instruments

• Comprise ownership stakes in a company, notably:
  • Ordinary share capital and preference share capital.
• Equity instrument types include preferred shares and ordinary shares.

Financial Markets

• Refers to venues for the creation and trading of financial assets, encompassing:
  • Stock Market: Trading of company shares.
  • Bond Market: Trading of debt securities.
  • Commodities Market: Trading of physical goods like oil and gold.
  • Derivatives Market: Trading of financial contracts derived from underlying assets.