explain the objectives of busness finance
Answers
Business Finance is one of the categories of a business skill that involves managing the money of one’s business. Managing money includes investing, borrowing, lending, saving, spending, etc. The objectives of business finance include:
Revenue Generation: The most important reason for which any business is carried on is revenue. All that difficulty in business, putting money in it is only with a reason to generate more money out of it.
Managing Operational activities: Operations can be considered as one of the most important objectives of business finance to keep the business running. Without operation objectives being met, the chances of revenue generation are reduced.
Productivity and Efficiency: Maximizing performance and performance of the employees drive revenue for the organization. Therefore, it is important to manage business finance.
Return on Capital Investment: Any finance is put into any business with a motive to get some return on their basic investment. Business owners want to be sure that the assets of the organization generate revenue that is enough to justify the cost associated with it.
Contingency Funds: While it is important to manage the finances of a business, it is also important to create funds that could provide for emergency situations. While we want profit from the business, we also want protection.
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Answer:
BUSINESS OWNERS SET DIFFERENT TYPES OF OBJECTIVES,INCLUDING FINANCIAL OBJECTIVES,,TO GIVE THEM A SOLID PLAN FOR MOVING IN THE DIRECTION OF LONG TERM SUCCESS. COMMON FINANCIAL BUSINESS OBJECTIVE INCLUDE INCREASING REVENUE,INCRESSING PROFIT MARGINS,RETRENCHING IN TIMES OF HARDSHIP AND EARNING A RETURN ON INVESMENT.
Explanation:
REVENUE GROWTH OBJECTIVES- increasing revenue is the most basic and fundamental financial objective of any business. Revenue growth comes from an emphasis on sales and marketing activities. An entrepreneur may set an objective of increasing revenue by 20 percent each year for the first five years of a company's operations, for example.
Profit Margins and Bottom-Line Earnings
Profit objectives are a bit more sophisticated than revenue growth goals. Any money left over from sales revenue after all expenses have been paid is considered profit. Profit, or bottom-line earnings, can be used in a number of ways, including investing it back into the business for expansion and distributing it among employees in a profit-sharing arrangement.
Profit goals are concerned first with revenue, then with costs. Keeping costs low by finding and building relationships with reliable suppliers, designing operations with an eye toward lean efficiency and taking advantage of economies of scale, to name a few methods, can leave you with more money after paying all of your bills.
Financial Sustainability in Times of Turmoil
At certain times, companies or brands may be primarily concerned with basic economic survival. Retrenching is a marketing technique – based on a financial objective – that attempts to keep a brand alive and keep current revenue and profit levels from falling any further during the “decline” stage of the product/brand life cycle.
Companies may be concerned with financial sustainability during periods of economic turmoil, as well. Common financial objectives for survival include collecting on all outstanding debts on time and in full, de-leveraging by paying off debt and keeping income levels consistent.
Return on Investment
Return on Investment is a financial ratio applied to capital expenditures. ROI can be applied to two basic scenarios. First, ROI is concerned with the return generated by investments in real property and productive equipment. Business owners want to make sure that the buildings, machinery and other equipment they buy generates sufficient revenue and profit to justify the purchase cost.
Secondly, ROI applies to investments in stocks, bonds and other investment instruments. The same principle applies to these investments, but there is generally no physical, productive asset used to generate a return. Instead, ROI for investment products is calculated by comparing the dividends, interest and capital gains realized from investments by the cost of the investment and the opportunity cost of forgoing alternative investments.