Finance as identified by any kind of lexicon refers to the subset of economics that primarily handles the portion of resources, particularly the managing of money, assets, and other property of even nature (Keown et. al, 2002). Every companies give high consider to monetary management. With regards to this paper, the author aims to discuss why financial managing is important.
Furthermore, it is also the goal of this paper to give examples that would expand our understanding of the fundamental role of finance in a business firm. Finance is necessary and essential to any business entity because it permits any firm to survive and grow as an organization. It allows a firm to increase its benefit and stock price in the industry it belongs. Truth to tell financing can actually end up being likened to the blood providing you with nutrients to every part of the body. Without financial and effective finance administration all areas of business learn to malfunction, which if not really properly resolved may lead to the death or perhaps end lifespan of business (bankruptcy).
For all of us to appreciate the above-mentioned function of financial in doing business let us consider the case from the College Confidence Plan (CAP), an educational insurance company inside the Philippines. Back in 2005, LIMIT was reported to be financially-troubled as it loss around Php4. 5 billion due to ongoing decline in revenues (Austria, 2005). The failure of the company in order to meet its economic targets as well as fulfill their particular obligations to their plan cases placed CAP in important position.
Taking into consideration all the information around the case of CAP, it is usually noted that mismanagement of funds is very much evident therefore, leading the business to a harmful position (i. e. shed its customer confidence and lost their value in the insurance industry). Moreover, the chance of being capable of undergo therapy as company was not granted to the organization given its current position illiquid and insolvent. In totality, it can be declared that finance is an indispensable element of business.
Furthermore, finance guarantees the continuity, growth, and improvement valuable proposition of any business entity. Nickerson, Robert C. (2001). Business & Information Systems, 2nd Edition, Prentice Area, Inc.