2. Understanding Finance
Finance is integral to business management, encompassing the raising and management of monetary resources necessary for operations. It can be categorized into owned and borrowed capital, with different types of finance depending on duration, including short, medium, and long-term finance. The significance of finance lies in ensuring smooth operations, supporting growth, and maintaining solvency, aided by various financial institutions and careful financial planning.
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What we have learnt
- Finance is essential for starting, running, and expanding a business.
- Sources of finance are categorized into owned capital and borrowed capital.
- Finance can be classified based on duration: short-term, medium-term, and long-term.
Key Concepts
- -- Owned Capital
- The money invested by the owner(s) of the business, including personal savings and retained earnings.
- -- Borrowed Capital
- Money borrowed from external sources, which includes loans from banks and issuing debentures, requiring repayment.
- -- Financial Institutions
- Organizations such as banks and insurance companies that offer financial services, facilitate loans, and help businesses manage risks.
- -- Financial Planning
- The process of estimating and securing the necessary capital for short-term and long-term business requirements.
Additional Learning Materials
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