Finance is the lifeblood of business
Finance is the lifeblood of business. No business enterprise can be started and operated with out adequate funds. In modern business, finance is required for the following purposes:
- To start a business, machinery, land and buildings, and other fixed asses must be purchased. Money required for the purchase of fixed ashes is called fixed capital.
- Money is required for purchase of raw materials, payment of wages and salaries and other expenses. It takes time to produce and sell goods. During this period, working capital is needed.
- Finance is required for replacement of worn-out plant and machinery. Without adequate funds, a business firm cannot modernize plant or machinery or use new methods of production and distribution.
- Funds are needed for expansion and growth of business.
Thus, finance is needed at every stage in eh life of a business. This importance of finance his increased with the growth of business. In modern business. Large amount of funds if needed for large scale production’s distribution. Changing business environment and increasing competition may require new methods of production and distribution. It may be come necessary to introduce new products and service in the market and to improve existing products and services. Additional investment for these purposes requires more funs. Adequate finance must be available at the right time to make business successful.