A Few Essential Terms About Business Finance

Business finance is an umbrella term for many things about the creative creation, management, and monitoring of financial resources and investments. As with any other word, there are as many definitions and interpretations of what it really means as there are businesses. The truth is that business itself is really a term used to refer to several things under the umbrella. All business is about sales, profits, and the tools used to make those profits happen on a daily basis. While business itself does involve management and the handling of financial resources, the underlying principles that govern business, especially in today’s global marketplace, are much more broad and far reaching than one could ever imagine.

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While there are many facets to business finance, perhaps the most commonly known is the purchase of goods and services. Business owners may purchase raw materials such as energy and other valuable materials, as well as capital assets such as plant and equipment. In addition, business finance also includes funding for the development of new products or services, the payment of employees, marketing and advertising, and a variety of other business financing needs.

In order to determine capital expenditures, which include the purchases of land, buildings, machines, and other items, as well as the repayment of loans and other advances, business owners must first be able to pinpoint their company’s financial needs. While this sounds fairly straightforward, there are a number of subtleties in determining capital needs that are ignored by many. For instance, a manufacturer may decide to expand its product line, even if it must pay more for raw materials, in order to service the growing demand for the product. In addition, there are other considerations beyond cash that must be taken into account when estimating future capital budget needs.