Tuesday, 12 April 2016

Let Me Introduce You To Business Finance And How You Can Finance your Business

Since we are here to discuss business and finance, most of what I will be sharing on business platform will be on how to source for finance, how to manage finance and how to get things done around business environment. Therefore, this article is on Business finance and I will take my time to explain it one after the other in details.

Decision about what to produce,  for whom to produce, for whom to produce and how to produce brings about the business and corporate finance because of the fact that many investors will not like to waste their limited resources (capital) on investment that will not yield him any good return because investors are to maximize profit on their wealth. 


Therefore business finance is concerned with making decisions about which investment the business should make among other alternative investment and how best to finance this investment.

One thing is to have enough money and another thing is to know best investment to undertake. Consequently another thing is to know a business to go for and another thing is to know a business to go for and another thing is to have money or enough capital to operate the business.

This is the reason why business finance involves in the financing and investment decision. It is intended to equate the finance with investment, showing the relationship between finance and investment. Business finance is concerned with making decision about which investment the business should make and how best to finance this investment.

 It is intended to show the relationship between the following:
1) Public finance
2) Corporate finance
3) Investment

Therefore it is set to analyze the activities of government, cooperate and individual in the Nigeria financial system.

Business and corporate finance embraces the financial intermediaries that process the transfer of fund from the surplus to the deficit unit of the economy. Financial intermediaries that process the movement or transferring money(funds) from the people who are willing and ready to give out ( surplus units) to those people who are willing and ready to receive (deficit unit) for adequate and proper utilization of these funds to promote and develop economic activities for the advantage of the whole nation.
           
The financial intermediary may include among other
1. Commercial Bank
2. Development Bank
3. Merchant Bank
4. Investment Trust
5. Insurance Company

FINANCIAL SYSTEM
The market includes those money market and capital market of an economy where buying and selling of securities and government bonds are sold.
      Financial system of a nation include
1. Financial Institution
2. Financial Market

Financial system are regarded as investment agencies or intermediary that their role is to raise money from members of the public and form the investor and invest on a business to yield good return on owner investment. The money can be obtained from the owner of business, it can also take the form of long term lending, short or medium term financial institution and market

 1. Financial Institution
 It can be divided into two types
A. Wholesale bank
It is a type of financial institution that is not created for individuals and they cannot save or withdraw money from it. Examples: Central Bank

B. Retail bank
They are commercial banks such as gtbank and Skye bank

2. Financial Market
There are two broad segments that exist in the financial market.
The system comprises the following segment:

A. Money Market
The money market is for raising short term finances by means of short term financial instrument of less than one (1) year in tenure. The main feature of the market is that it does not have definite place of business.
             
 Participants in money market
1. Central bank of Nigeria
2. Commercial bank
3. Merchant bank
4. Discount houses
5. Investment and unit trust
           
 Money market instrument
1. Treasury bill
2. Call monies
3. Treasury certificate
4. Certificate of deposit
5. Bankers unit form

B.  CAPITAL MARKET
It is the framework institution that arrange for long term financial asset such as shares, debenture stock and mortgage.
     
 Instruments used in capital market
1. Shares
2. Debentures
3. Government stock
4. Mortgage
     
 Participants of capital market
1. Nigeria stock exchange
2. Stock brokers
3. Insurance company
4. Central bank of Nigeria
5. Issuing houses.
           
 Segments for capital
A. Primary market
This is referred to as new issue market and it serves as the introductive point to the company to raise finance on the market for the first time

B. Secondary market
This is another capital market segmentation that is concerned with market that purchase and sales of existing shares and stock.

0 comments: