Finance

• What do Finance departments do?

  • Recording all financial transactions, such as payments to suppliers and revenue from customers.
  • Preparing final accounts.
  • Producing accounting information for managers.
  • Forecasting cash flows.
  • Making important financial decisions, for example, which source of finance to use for different purposes within the business.
• Why do businesses require finance?

  1. Expansion of an existing business.
  2. Additional working capital.
  3. Starting up a business.
• Start-up capital is the finance needed by a new business to pay for essential non-current (fixed) and current assets before it can begin trading.

  Working capital is the finance needed by a business to pay its day-to- day costs.

  Capital expenditure is money spent on non-current (fixed) assets which will last for more than one year.

  Revenue expenditure is money spent on day-to- day expenses which do not involve the purchase of a long-term asset, for example, wages or rent.
• Sources of Finance:

  Internal finance is obtained from within the business itself.

  External finance is obtained from sources outside of and separate from the business.