Question

What is business finance? Why do businesses need funds? Explain​

Answer 1

Answer:

Business is an economic activity directed towards producing, acquiring wealth through buying and selling of goods. It is a very wide term. Finance is the life blood of the business. Funds are required to commence and carry on business. All business activities such as planning, organizing, managing, controlling, purchasing, selling, directing, marketing etc cannot take place without finance, Thus, we can say requirements of funds by business to carry out its various activities is called business finance. When an entrepreneur takes a decision to start business the need of fund arises in order to meet the expenses of establishment of business, finance is required for purchasing fixed and current assets, for day-to-day operations, purchase of raw material, to pay salaries etc. Smooth functioning, expansion and growth of business is possible when it has sufficient funds.

Explanation:

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Answer 2

Business finance is the process of acquisition of funds and proper allocation to meet the business needs for smooth operation.

Explanation-  

Business finance is the process of the acquisition of money from the outside of the firm and utilization of funds in a manner to meets all the financial needs in an accounting period.

Business finance is not just about the acquisition of funds but also opting for the best source as per the nature and the scale of the business.

Needs of a funds in a business -

Funds are certain the amount of money that is brought to the business. These funds fulfill the requirements of the business like the purchase of assets, investment purpose, meeting firms expenditure or utilized as the capital for the business growth and expansion.

The business has limited funds to work within an accounting year. Being; Business a dynamic process leads to the urgent or create unexpected need of funds to maintain its processing. So, a business has the needs of funds in its cycle of working.

Conclusion-

Business is a human body, that needs money as its fuel for the maintenance of daily operation and meets its ends.

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