Importance of Business Finance

Importance of Business Finance

In the present competitive open market economy, every government, non-government, and international business institution has to finance with great importance in a preplanned way. Through the use of well-thought and effective financial management, the risks of the institutions are reduced and profits are increased. The following things make financial management more meaningful:

a) Capital Crisis of Business

Finance-related ideas bear special importance in the situation of Bangladesh. As Bangladesh is a poor country, the financial crisis is a regular incident for business organizations. Due to this crisis, running the business smoothly has become very challenging. It could be said as an example, a business organization needs to purchase raw materials, but if it cannot purchase raw materials timely due to the financial crisis then the production process of the organization may be hampered. Finance-related ideas help a business entrepreneur to collect the necessary amount of funds at the right time and utilize it properly in a planned way.

b) Backward Banking System

Besides, as our financial organizations are not well-organized like that of the advanced countries, (usually) loans cannot be arranged within the expected time after application. Sometimes, the loan cannot be arranged as per the required amount due to the insufficiency of property to be pledged as security for sanctioning the loan. So, to overcome this problem, business people have to collect funds at the right time in a very well-planned way and also need profitable utilization of the fund with the right investment decision. A proper financial plan and management help him to predict this type of problem and give an idea about the process of overcoming such a situation.

c) Less Educated Entrepreneur

The majority of the entrepreneurs in Bangladesh are less educated and are not able to conduct financial activities through a long-term plan. So, many profitable business organizations cannot operate smoothly due to the financial crisis arising from improper financial planning, and in the end, it faces loss instead of profit. But, the only reason for this loss is financial ill-management. If a businessman has sufficient knowledge about financial management he can easily collect the necessary amount of funds at the right time from a less expensive source and can earn enough profit by running his business by investing it in a suitable project.

d) Production-Oriented Investment and National Income

A successful investment plays a direct role to increase national income. By applying financial knowledge, a business person can choose the most profitable project from among the alternatives by doing a cost-benefit analysis of the projects under consideration. This type of profitable investment is as much meaningful for the business so much it is important also for the economic development of the whole country.

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