Finance And Business Finance...


The scope of trade has also increased with the development of society, science and technology. As a result, multifaceted competition has been created in the product market. In order to make a profit in this competition, a businessman needs to utilize the money through sound planning, so that production or selling costs can be kept to a minimum. In this the business organization is successful in achieving maximum profit. For that purpose every organization collects the required funds for its investment from the most desirable sources and invests the funds in the best projects by analyzing various data of the product-market. As a result, there is an inflow and outflow of money in the business enterprise. Finance regulates this flow of money smoothly. Various financing policies are used in this regulatory process. Funding management helps a businessman to earn more profit with less capital investment. Nowadays finance is not used as a supporting process of business management but as the main driving force of business.







The financing process is as important for a business organization as it is for a non-business organization. Each organization is involved in a different financing process. This process takes different forms in different organizations. Now we will discuss one such classification of financing. Although the focus of our lesson is on business financing, here we will also get a brief idea of ​​the financing process of some other organizations.

A) Family finance.:

Family finance determines the source and amount of family income, how to spend that income for the overall well-being of family members. Among the many expenses that a household needs, the most important expenses are met on a priority basis. If the income of the family is not enough for the expenses, then money can be taken as loan from various relatives, acquaintances, friends. Regular expenses are determined in accordance with regular income. Fixed assets such as: TV, fridge, car, house construction money can be taken from the bank. But as the funds collected are limited it needs to be used appropriately. If the funds collected by the household are more than the required expenditure, it is saved for future use.

B) Government funding.:

Every government has a money management system. In the context of a government, how much its annual expenditure will be in certain sectors and from which sources that money can be collected, is discussed in public finance. The government has to spend money in many sectors for the overall development of the country, such as: roads, bridges, government educational institutions, government hospitals, law and order and defense, social infrastructure, etc. To meet this expenditure, the government has to collect money from various sources, such as: income tax, value added tax, gift tax, import duty, export duty, savings bonds, prize bonds, treasury bills etc. In public financing, funds are collected by first determining the amount of expenditure. The main objective of government funding is social welfare. Government funding is generally non-profit. Government-financed expenditure may be higher than income. There are a number of government-owned businesses, which can be relatively unprofitable. Eg: Chemical industries under BCIC. Again, big projects like Bangabandhu Bridge require a lot of money, if the government budget has to provide full funds. At times there may be shortage of funds for social and state security related expenditure of the government. As a result, many times the government takes foreign loans from various sources. For example: ADB (Asian Development Bank), World Bank, IDB (Islamic Development Bank) etc. However, these institutions include various conditions while granting loans, which may not be compatible with the development and preservation of the country's image. Considering this situation, the government wants to raise funds from other sources. Currently, large projects are financed through public and private collaborations worldwide and in our country. This type of financing scheme is called PPP (Public Private Partnership).




C) Business financing.:

The most important type of financing is business financing or business finance. An organization that takes the risk of profit and loss for the purpose of earning profit is called a business enterprise. As a result, the financing process used by the business organization to collect and invest its funds is called business financing. Business organizations are divided into 3 categories: sole proprietorship, partnership and joint venture. The common features of financing in these three types of institutions are collection of funds for investment and management of funds. Equity and debt are used as sources of financing. Business finance is the focus of this lesson.

The most popular businesses in Bangladesh are usually small businesses, formed as sole proprietorships or partnerships. Various small and cottage industries, rural hotels and restaurants, grocery stores, salons, boutique shops, etc. In a sole proprietorship, if the profit is made by the owner alone, if there is a loss, the personal property of the owner is also used for compensation.

In a partnership firm, risk is shared among the partners, so the business has to be prepared to use personal assets to bear financial losses. In such a sole proprietorship or partnership business, the source of raising funds is the owner's own funds, profits, loans taken from relatives, interest-based loans from banks or rural moneylenders. Therefore, the main objective of financing such institutions is to earn profit by employing own funds and ensuring its proper use.

The financing process of joint venture companies is different. For an organization to become a joint venture, government approval is required. Before sanctioning the minimum capital amount, the government scrutinizes the directors' credentials, business objectives and various documents. Once approved, a company divides its large number of required capital into smaller numbers and sells them as shares. Eg: A capital of Rs 10 crore is divided into 1 lakh shares of Rs 1,000 and sold to the general public. As each share is worth only Rs 1,000, small profits in remote areas of the country usually receive regular dividends. Investors can also buy company shares. The shareholders are the owners of the company and the company can convert the shares into cash by selling the shares in the stock market such as Dhaka Stock Exchange. A joint venture can also raise funds through loans from the general public by selling bonds and debentures without shares. In that case, debenture holders i.e. those who buy debentures or bonds, have to pay interest regularly at a fixed rate. Because they don't own the company like shareholders.