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



Q.1:- What is business finance? Why do businesses need funds? Explain.

 

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.