BED 307 Business Finance Course Outline PDF

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Okay, here's the markdown conversion of the text in the images you sent. I've focused on extracting the key information, formatting it for readability, and summarizing where appropriate. ```markdown # BED 307 Business Finance ## Course Outline * Concept of Business Finance * Areas and Functions of Business Finance * Goals of the Firms (The Business Objectives) * Capital Budgeting * Time and Value of Money * Methods or Project Evaluation * Financial Ratio Analysis * Financial Forecasting * Nigeria Stock Exchange * Nigeria Securities and Exchange Commission ## Introduction to Business Finance Business finance is the process of managing the financial resources of an organization to achieve its goals and objectives. There are various resources, but the major one is human resources. This amount of fund is used for purchasing goods, raw materials, and assets that facilitate economic activities. ### Goals of Business Finance The main goal is to maximize stakeholder wealth by generating profit and thus increasing the value of the business. Business finance also means money required to carry out business activities. Finance is needed to establish a business, to run it, to modernize, or diversify it. We need money for buying a variety of assets which may be tangible (e.g., machinery, furniture, office building, etc.) or intangible (trade mark, technical expertise, patents). Finance is also a setback for the day-to-day operations of the business by paying bills, salaries, and collecting card from customers. Accountability of adequate finance is crucial for survival and the goal of the business. We can also see business finance as the needs of a business for commercial purposes. It is the money the owner of the business uses to start, run, or expand a business. It is nearly impossible to succeed without strong finance in place. We use finance to purchase assets, raw materials, or goods. Anything that will put the business forward is why finance or funds are known as livelihood of any business. A business cannot be formed properly unless we have an adequate amount of accessible money to the owner. Business finance includes tasks like: 1. Budgeting 2. Financial Forecasting 3. Investment 4. Risk Management ## Business Finance Business finance is a field of focus on the management of capital within a business organization. It encompasses a wide range of activities related to acquiring, managing, and utilizing funds in a manner that ensures the business's growth and stability, and profitability. The goal of business finance is to maximize the value of the company for its owner and shareholders by making sound financial decisions. ### Key Components of Business Finance 1. **Financial Management:** Refers to the planning, organizing, directing, and controlling financial resources in an organization. It involves budgeting, forecasting, managing cash flow, financial analysis, and decision-making related to capital structure and financing options. 2. **Capital Structure:** Refers to the mix of a company's long-term debts, equity, and retained earnings that are used to finance its operations. The decision regarding capital structure determines the financial risk of a business and it's ability to generate returns for stockholders. 3. **Investment Management:** Involves making decisions regarding where and how a company should invest its financial resources. It includes evaluating potential investment opportunities, considering risk and return, and deciding on asset allocation in both short-term and long-term allocation. 4. **Financial Planning and Forecasting:** Is a process of creating a strategy to manage and allocate financial resources in the future. It includes forecasting for future revenue, expenses, and cash flow to ensure that a business can meet its financial obligations and strategy decisions. 5. **Risk Management:** A good business man, this include identifying financial risk such as market flunctuation interest rate changes, credit risk and operational risk and employing companies strategies like hedging, insurance and diversification try to mitigate them. ## Functions of Business Finance 1. **Funding Operation:** It also involves using internal funds and external funds. Paying wages, buying invention or convey operational expenses. 2. **Strategic Decision Making:** As a businessman, you should be able to take decision on evaluating your declining business. 3. **Profit Maximization** 4. **Budgeting and Control:** Budgeting is a key element of business finance because it helps organizations plan their finance over a specific month. It allow business to allocate Funds over to Various department in an organisation. 5. **Cash Flow Management:** Ensure that business meets short term liability. ### Business Finance Decision Making Areas 1. **Capital Budgeting:** It involves evaluating and selecting long-term investments that will generate 2. Capital raising 3 Financial analysis and performance 4. Financial Ratio 5 Dividend policy # OBJECTIVES OF BUSINESS FINANCE 1. Maximizing shareholder wealth 2 Ensuring Liquidity and solvency: Businesses needs to ensure that they can meet their short term obligation while maintaining Capacity to remain solvent in the long term i-e you should ensure that you will meet your short term Obligation. 3 Balancing risk and return 4 Efficient allocation of resources. # Importance of Business finance 1. It Sustains business operation! This means that the business has financial resources for day to day activities and growth for the long run. 2. Facilitate Strategic growth : It ensures that the Company make lonformed decision about the expansion, mergers, acquision Couying Companies) 3. Mitigate financial rist 4 Improve decision making 5 Enhances Competitive advantage 6 Higher Profitability # CONCLUSION Business finance is an essential function within any Organization Providing the tools, techniques and strategies Sinesses needed to manage financial resources effectively. It Inudues Obligation, a broad spectrum of activities from securing capital and managing Cashflow to making Investment decision and evaluating risk by effectively managing business finance Companies can achieve their financial growth, support growth and enhance stakeholder value ## ROLES OF FINANCIAL MANAGEMENT IN BUSINESSES 1. Planning and forecasting Budgeting-You must be able to create a financial Plan that allocate resources to various department. Budgeting is a Short term plan. Castio flow forecasting: determine future cash flow and Cash out flow too. This is to ensure that the business Maintain sufficient liquidity to meet up it's obligation Long term financial Planning. The management is to ensure that you have to plan for long. term goals Le extension, diversification, Capital Investment. This Include evaluating cost, benefits and financial implication of Capital Investment. 2 Investment decision making: In taking decisions you have to evaluate Investment Opportunities. 11 Capital Allocation: determining which project to allocated Company resources business 3 Financing decision: ways to raise Capital for the * Equity financing: Issuing Cash or fund to raise capital therey Increasing Dwnership among shareholder * Deby financing: borrowing fund through loans, bond or Credit line which must be repaid with Interest overtime Hybrid financings. Combining both equity financing and debt financing. * Cost of Capital utilization 1: financial manager strive a to determine the right mix of debts or equity that minimizes the Overall cost of capital while maintaining an appropriate level of mix in business 4. Managing financial risk * Market risk! risk arising from flunctuation in Interest rate, exchange rate or Commodity prices * Credit risk! This is the risk that Customer may fail to Pay for goods or Services on time * Operational risk : Risk arising from Internal Processes system or human factor within an organisation 5 Ensuring liquidity and solvency Liquidity refers to a company ability to meet short term financial obligation while solvency refers to it's ability to meet long term debt and Obligation. *Cash management: To cover operational expenses. Credit and Investment. * Working Capital management: It Involves managing Debt Company short term asset and liabilities such as Inventories, receiveable and payable to ensure smooth business operations and avoid 6 Performance evaluation and Control *Financial analysis we use tools such as ratio Trend analysis, benchmarking, debt analysis to ensure * Variance analysis: Comparing actual financial far for max against budgeted target to identify any discrepancy and take Corrective action if needed * Cost Control 7 Dividend and profit distribution decision * The dividend policy: must allign with Company finandal Position * Retention of earnings * Balanang Stakeholder expectation: Malking Share holders and workers happy. 1. Corporate governance and ethical financial management * Adherence to financial regulation :: It means you re must comply with financial reporting Standard, tax law and regulation Set by regulatory bodies * Ethical decision making: -I decision must wallign with decision standard and Promote social responsibilty * Financial transparency: You must be transparent, reliable, and timely - Information to share holder Hability-Paying Creditor (Reople the business is owing). Bond 9 Strategic business development * Long-term sustainability * Support growth Strategy * Create Cooperative advantage MAJOR FINANCIAL OBJECTIVES OF A BUSINESS. 1. Profit maximization Profit) 2. Revenue growth :: To Increase company's income over time 3 Cost efficiency and profitability - To reduce Cost and Improve profit margin 4.Liquidity management:: refers to business activitees Ito generate cash and meet with Shortterm liability. ou refers 5 Solvency and long-term financial Stability : Solvency oto the ability of the business to meet long term financial and Obligation and avoid bankrupty. 6 Return On Investment : The major Objective is to st achieve high return On Investment in a business Returns on Assets (**ROA**) Returns on Equity (**ROE**) 7 Capital Structure optimization is to establish nd Optimal capital Structure where the business balances (debts). salbonds) and (equity) to minimize the cost of capital Lohile managing financial risk .8 Dividend policy and share holder value .9 Risk management and financial Stability managing financial rist Involve addressing uncertainty related to market flunctuation, Interest rate, Curren cyflunctuation and credit.. rise 10 Growth and expansion 11 kWorking capital management12 Financial transparency and reporting. Relationship between business finance and other business function In any Organization, finance is a central function that Inter relate with almost any other business function Effective financial management ensure Smooth operation and growth of a business and it must work in harmony with areas such as marketing, Operations, human resources and others to achieve the organisation Overall goals **Area 1:** FINANCE AND MARKETING [Three major areas] 1. Budget allocation. Vida latino bathing to the finance to know about the budget allocation. 2. **Pricing Strategies**: 3 Profitability analysis Customer acquisition Cost Long term value (2 Finance and operation i Capital expenditure known as CaPEX 11 Cost Control and efficiency : finance ensure that Process operational watt are cost effectue by working 1111 Working Capital management : day to day flow of Cash resources (3 Finance and human resources. i Payroll and Compensation 11 Recruitment and talent acquisition. 111 Employee benefit and retirement Plan It Finance and Procurement Taxat Supplier payment term 11 Cost management ill Inventory management 1. Finance and sales. Sales forecasting 2. (ii) Credit Management iii Incentive plan (6 Finance and ICT i Technology Investment decision 11 Cost efficiency in ICT Operations III Cyber security and financial risk (7 Finance and Legal / Compliance unit iLegal and finance as team work together to ensure ope Compliance worth financial regulation and reporting standard teris this is essential to maintain transparency, avoid legal in of Penalty and upholding the Company reputation i Contractual Obligation and financial Impact i Litigation and financial risk Cas Finance and Strategic planning) (i Long term financial goal) (11 Merger and acquisition) (110 financial variability of Strategic Initiative) Operational efficiency 1e Company is minize their resources Financial Decision making Financial decision making is critical for the success and Profit ability of a business it Involves choosing among alternative that allign with Organization objectives... The nature of this decision can be broadly classified into short term and long term decision and each with distinct goals and time horizon zon and finandal Implication. SHORT TERM DECISION Short term decision has to do with managing day to day to ensure Operation of a business This decision have relatively short andard term rising usually less than a year and aims to ensure liquidity, legal frofitability and operational efficiency impact #### Characteristics of Short Term Decisions 1. Typically takes one year (**Time Horizon**) 2. Focusing on immediate needs e.g. working capital 3. Cashflow and day to day financial operations 4. To maintain Liquidity 5. To meet Short term Operation 6. To ensure smooth Operation #### Types of short term decision 1. With Cashflow Management that ensuring that the business has sufficient liquidity to cover day to day expenses end Paying Suppliers, employees and Creditors <!-- The notes skip from page 15-16 --> 3. Need based Project! These are the 6 • Project that are basically driven by the need of the organizations