Business Finance, Needed and it’s Kinds

Capital required to conduct the business in audit to achieve different object is called business finance.

Needed of Finance

Finance is needed for the following objective.

Fundamental Need

The business man has to decided nature, sit, scale of technique and the marketing of his product. All such matters need finance for adviser, exports and surveyor etc.

Establishment

The business is to be set up. Land is purchased, machinery is ordered. Building is to constructed, supervisor, manager, watchman are to be employed. Infra-Structure like transport, communication water and power are to be arranged.

Operation

The business is to be started. Working capital is needed for the purchase of raw material; labor force is to be employed. Wages are to be paid to them. Interest is paid to the bank etc.

Maintenance

The productive capacity of the firm is maintain. The work out machinery is repaired some stock is replaced. Research is carried out to improve technique of production.

Growth and Development

Every firm has to grow and develop to earn maximum profit. New plants are setup. Latest machinery is installed. New markets are surveyed. Scale of production is extended.

Emergencies

Finance is needed to cover the unexpected risk and emergencies. More funds are needed to meet the labor strike, demand for higher wages bonus and new taxes etc.

Kinds of Business Finance

Finance is needed for development purpose like the purchase of land and stock capital of goods construction of building as well as infra structure. Funds are also needed for emergencies; social security’s and welfare of the labor force etc. finance are of three kinds.

Long Term Finance

The duration of such finance is between three to ten years. Such loans are taken for the purchase of land and equipment, construction of building and infra structure and the replacement of old machinery with latest one.

Medium Term Finance

The duration of finance is between one to three years. Such finance are needed to meet the fundamental needs of the firm as well as for operation

Short Term Finance


It ranges is between 30 days to one year. Such loans are taken for operation and maintenance like the purchase of raw material, payment of tax, wages and rent and all other emergencies.