Business finance

Definition

Business finance involves the management, creation, and study of money and investments for a business. It encompasses activities like budgeting, investing, borrowing, forecasting, and analyzing financial performance.

5 Must Know Facts For Your Next Test

1. Business finance is crucial for making informed decisions about resource allocation to maximize company value.
2. It includes both short-term financial management (working capital) and long-term planning (capital budgeting).
3. Key components include understanding financial statements, cash flow analysis, and risk management.
4. The primary goal of business finance is to achieve a balance between profitability and liquidity.
5. Financial markets play a significant role by providing the means for businesses to raise capital.

Review Questions

• What are the main activities encompassed by business finance?
• Why is business finance important for decision-making in a company?
• How do financial markets contribute to business finance?

Related terms

Capital Budgeting: The process of planning and managing a firm's long-term investments.

Working Capital: The difference between a company’s current assets and current liabilities.

Financial Statements: Records that outline the financial activities and conditions of a business.