The Cambridge IGCSE\u00ae and O Level Business Studies Student Textbook will help you to navigate syllabus objectives confidently. It is supported by a Workbook, a Study and Revision Guide, as well as by Student and Whiteboard eTextbook editions and an Online Teacher\u2019s Guide. All the digital components are available via the Dynamic Learning platform.<\/p>\n
What do finance departments do?<\/p>\n
Finance departments fulfill a very important role in business. They have the following responsibilities:<\/p>\n
Why do businesses need finance?<\/p>\n
Finance is money. We all need money to purchase the goods and services we require \u2013 everyday goods, like food, but also more expensive items such as a house or car. Businesses need finance too \u2013 and this is often called \u2018capital\u2019. Without finance, businesses could not pay wages, buy materials or pay for assets. Here are three examples of why finance or capital is needed:<\/p>\n
When an entrepreneur plans to start their own business, they should think about all of the buildings, land and equipment they will need to buy in order to start trading. These are usually called fixed assets (see Chapter 24). Nearly all new businesses will need to purchase some of these. In addition, the owner of the firm will need to obtain finance to purchase other assets such as inventories, before goods can be sold to the first customers. The finance needed to launch a new business is often called start-up capital.<\/p>\n
The owners of a successful business will often take a decision to expand it in order to increase profits. Additional fixed assets could be purchased \u2013 such as larger buildings and more machinery or another business could be purchased through a takeover. Other types of expansion include developing new products to reach new markets. This form of growth could require substantial amounts of finance for research and development.<\/p>\n
Working capital is often described as the \u2018life blood\u2019 of a business. It is finance that is constantly needed by firms to pay for all their day-to-day activities. They have to pay wages, pay for raw materials, pay electricity bills and so on. The money available to them to do this is known as the firm\u2019s working capital. It is vital to a business to have sufficient working capital to meet all its requirements. Many businesses have stopped trading, not because they were unprofitable, but because they suffered from shortages of working capital. So, the third major business need for finance is often to raise additional working capital. In all three cases above, businesses may need finance to pay for either capital expenditure or revenue expenditure. It is important to understand the difference.<\/p>\n
Sources of finance There are many different sources of finance available. It is common to split them up, or classify them, into different groups. The two most common ways of doing this are:<\/p>\n
Feel free to read through this book if you want to explore more about business studies.<\/p>\n","protected":false},"excerpt":{"rendered":"