This finance deals with finding ways to accumulate capital for business activities, as well as determining what should be invested in order to earn higher returns. There are various theories on the subject, including the theory of demand and supply, capital budgeting, and the business cycle. The supply chain theory postulates that the supply of resources determines the price level of certain goods and services, while the other theories postulate that business cycles are caused by changes in the supply of funds, factors affecting the balance of payments, the rate of interest, and the structure of banks. There are also theories which attempt to explain away the gaps between the return on investment and the return on assets of a business undertaking.
One of the first things that any businessman will do when starting up a business is conduct a study on the business finance available. All businesses need capital and understanding of the financial statements is important for a businessman who aims at raising funds for his business venture. The financial statements serve as documentation on the finances used for a particular company, showing the nature and extent of the capital used for its operation as well as its working capital or balance. The financial statements should include all information necessary to assess the performance of the business venture, as well as a company’s progress in maintaining its balance sheet. The accountant also provides support in analyzing the balance sheet in order to achieve the goals of the business owner. All financial statements should be prepared in accordance with applicable laws, in order to avoid legal problems for the business.
Obtaining finance for a business is very different from obtaining finance for an individual or an organization. Since it is crucial for a business to raise funds, several processes are involved in acquiring finance for businesses, including proposals, credit checks, financial statements, and loan negotiations. Many business owners use loans to finance their ventures, but some opt to obtain a line of credit from the lender instead. Line of credit is an unsecured loan, which allows the borrower to borrow money without securing any kind of collateral. Obtaining finance from a lender requires much more research than obtaining a loan from a third party.