What Is Finance And Its Importance?

Finance is the life blood of business. It flows in mostly from scale of goods and services. It flows out for meeting various types of expenditure. The activating element in any business which may be on industrial or commercial undertaking is the finance.

Business finance has been defined as those activities which have to do with the provision and management of funds for the satisfactory conduct of a business. Business finance is defined as that business activity which is concerned with the acquisition and conservation of capital funds in meeting the financial needs and overall objectives of business enterprise.

So we can say business finance is mainly developed around three major objectives. Firstly, to obtain an adequate supply of capital for the needs of the business, Secondly, to conserve and increase the capital through better management, Thirdly, to make profit from the use of funds which is an overall objectives of a business enterprise.

Before industrial revolution, finance was not of much importance. The methods of production were simple. For example, the artisan used to work in open small hut. He had simple tools mostly made by himself. Labour at that time was more important than capital and finance did not pose any problem. Production in those days was, therefore labour intensive.

Finance is a term used for money. In businesses it is used. Planning and organising and controlling of finance in a business is a primary activity. We can say that Finance is a basic needed thing to start a business.