Role and Importance of Finance


Finance is considered Life Blood of the business and management of finance requires a considerable expertise and specialized knowledge of all aspects of finance. It is defined as planning, organizing, directing and controlling of financial activities in a business enterprise. It involves decision making in three areas that are an investment of funds, financing of different activities and disposal of profits.


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The major role of finance in the organization is to do procurement of funds that is to ensure adequate and regular supply of funds at a reasonable cost, Utilization of funds that is maintaining balance of profitability, liquidity, and safety, Return to shareholders that are market price is the good indicator of net present value or wealth of shareholders. Through functioning financial management various decisions are taken that are investment decision, finance decision and dividend decision.

Finance holds great importance in the organization as it is the activity concerned with planning to rise, controlling and administering of funds used in the business. The importance of finance in the organization is to estimate capital requirement, determining the composition of capital, determining the sources of funds, utilization of funds, Disposal of surplus, Management of cash and finance control.

The various role of finance manager is a determination of objective, determining the structure of capital, determining the sources of finance and management of cash.


Role and Importance of Finance Homework Help