introduction to finance

• Role of Finance

  Two major ways businesses can spend money
• Finance is important for all stages of Business Development
• Finance is needed to set up a company, run a business, and expand a business
• Different sources of finance are appropriate for different types of business entities
• Two major ways businesses spend money

  1. Capital expenditure (buying fixed assets that last >1 year)

  2. Revenue expenditure (daily running costs)
• Capital expenditure

  Long-term expenditure on fixed assets that last >1 year
• Revenue expenditure (opex)

  Payment for the daily running of the business (e.g. wages, electricity)
• Money/Finance is limited, so businesses need to balance capital and revenue expenditure
• If spending is mostly on capital expenditure, there may not be enough finance for daily operations
• If spending is mostly on revenue expenditure, there may not be enough finance for growth and purchasing fixed assets
• Balance between capital and revenue expenditure is important due to limited finance