Business Finance and Financial Management

Business finance is the process through which a financial manager or accountant gives finance for business use as and whenever it is required.  This provision has to be undertaken on the basis of the requirements of a company. On the other hand, Financial Management is a branch of economies concerned along with the generation and allocation of scarce resources to the most efficient consumer within the economy or as the firm.  The allocation of these resources is done with a market pricing system.  The firm needs resources in form of funds raised from investors.  The funds must be assigned within the organization to projects such will yield the highest return.

1. Requirements Consequent on the Operations of a Company as Basic Requirements

These have to be financed in so far as they arise out of the company's operations as salaries.

2. Shortages of Cash Brought About through Unforeseeable Circumstances E.G Non Payment via Debtors

These requirements have to be financed with short term finances e.g. overdrafts, however this may be against financial prudence rather such desires should be financed along with revolving finances in the circular flow. Although, the financial manager must manage his finances via such tools as:

1. Cash budget - statement of expected receipts and payments over a projected duration of time - a forecast.
2. Funds flow statement - (Actual).

Variance among actual funds flow along with cash budget. The variance must be arranged to remain the company liquid.