Corporate Finance: Corporate finance is concerned with the financing and investment decisions made by the management of companies in pursuit of corporate goals. As a subject, corporate finance has a theoretical base which has evolved over many years and which continues to evolve. It has a practical side too, concerned with the study of how companies actually make financing and investment decisions, and it is often the case that theory and practice disagree. The fundamental problem that faces financial managers is how to secure the greatest possible return in exchange for accepting the smallest amount of risk. This necessarily requires that financial managers have available to them (and are able to use) a range of appropriate tools and techniques.
Although, you share the risks and liabilities of company’s ownership with the coming partners or investors. Since you don't have to pay liabilities and debts, and also you able to use the cash flow generated to further raise the company or to expand into other areas. Keep going or maintaining a low debt-to-equity ratio also allows you to get a better place to get a loan in the future when needed (Kokemuller, 2010). Disadvantages of Equity If a company chooses equity to invest it the company, the owner or the company gives up fractional ownership or partial ownership, however; some levels of having decisions authority over your business. When a company uses much stock investors frequently be adamant on placing representatives on business panel or in decision-making positions.
It must be full fill the business concern’s requirement. Every organization must maintain adequate amount of finance for their smooth running of the business organizations and to achieve the business goals. Importance of Finance can’t be neglect in an organization. Some are the importance of financial management is as follows: • Financial Planning Financial planning is an essential part of the business organization. Financial management helps to determine the financial requirements of the organization and leads to take financial planning to the organization.
They are a conduit for social and economic policy. Comparatively, banks have extended in to other areas, which include insurance, loans, investments, real estate and other financial vehicles. Lastly, the final strength is that banks can create money, by using the reserve requirement to their advantage. However, if you have strengths you have weaknesses. One weakness is that, historically banks have lacked innovation.
Having proper knowledge of financial management will help a person to make its decisions wisely, thus each and every person will be able to save money and achieve their goals. For example, if a person has knowledge on financial education then that person can make a plan to achieve its goals, control and monitor its daily expenses and then finally can organize its money to achieve the desired result such as buying a car or house. This can lead to the improvement in the standard of living of a particular person. Along with that, when people get income it is either saved or consumed .As people make wise decisions and save money in their bank accounts, the money which is placed are mostly given out as loans to the firms for investment and when investment increases output also needs to increase, thus a lot of people are required to produce the output resulting in increase in employment. People who were unemployed before are now earning a source of living which will increase their standard of living.
One way to attain wealth is by selling and buying goods that others want or have so that good amounts of profits are made. Many different people gain access to these goods by setting up economic based markets in which he, she, or the government controls. There are three types of economic system plans shared by all, Free Market Economy, Command Economy and Free Enterprise. In a Free market economy, the government imposes few or no restrictions and regulations on buyers and seller. This means that sellers determine what products are produced, how, when and where they are made, to whom they are offered, and at what prices are based on supply and demand.
Financial management describes the proficient and valuable management of money (resources) in such a approach as to get done the goals of the organization. It is the particular function directly connected with the top board executive. The importance of this function isn 't always seen inside the 'Line ' however additionally in the potential of 'staff ' in average of a organization. it has been described in another way through one of a kind specialists within the discipline. The term normally applies to an enterprise or enterprise 's monetary strategy, while individual finance or financial life management refers to an individual 's management approach.
The cooperatives have inherent advantages in tackling the problems of poverty alleviation, food the higher authorities of the banking should help the lower authorities in the way of mother institutions. They should provide authority, leadership, guidance, supervision and control. There should be mutual support, help, accountability and responsibility in the system so that there should be a good and effective relationship between there tiers. The deposit mobilization profit and reserves should be commonly shared. In fact the self reliance is the main theme of progress of cooperatives deposit mobilization.
And also the main reason of fluctuation and hurdles in economic development because of interest rate of money. And also creates unequal of distribution of wealth within the society as power of money in few hands. (Farooq 2012). Interest rate affects all sectors of all economy It has a major impact on banking sector because many countries have directly deal with money. The globalization is increasing so it has made efficiency as the most important factor of both financial and non-financial institutions and banking sector as the life of blood the modern trade of commerce.
Furthermore, money and its value, the key raw material of the financial services industry, to a large extent is both defined and determined by the nation state, i.e. by regulating authorities par excellence. Safety and soundness of the financial system as a whole and the enactment of industrial, financial, and fiscal policies are regarded as the main reasons to regulate the financial industry (see Kareken, 1986; Goodhart, 1987; Boot and Thakor, 1993). Also, the financial history shows a clear interplay between financial institutions and markets and the regulators, be it the present-day specialized financial supervisors or the old-fashioned sovereigns (Kindleberger, 1993). Regulation of financial intermediaries, especially of banks, is costly.