Business Organization and Management, 2012
52 Pages Posted: 25 Jul 2019
Date Written: 2012
Every enterprise needs funds for setting up new ventures, acquiring a project, and continuous operation and growth of the business. The funds can be raised through equity or debt. An appropriate combination of equity and debt is important keeping in view the cash generation by the enterprise through its operations. Managing the finances of an enterprise on sound principles is as important in business as production and marketing.
An enterprise can raise funds from several sources and has to utilize these funds in alternative investment opportunities. In order to ensure the most judicious utilization of funds and to provide a reasonable rate of return on the investment, sound financial policies and programs are required. Unwise financing can drive a business to financial crisis that may result in bankruptcy as we saw in the case of Wockhardt. On the other hand, sound and efficient financial management can create value for the enterprise. Good financial management includes identifying appropriate investment opportunities, funding them with a judicious mix of debt and equity and disbursing its profits in such a manner that they create value for the firm.
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