Finance is the lifeblood and nerve center of a business, just as circulation of blood is essential in the human body for maintaining life; finance is a very essential to smooth running of the business. It has been rightly termed as universal lubricant that keeps the enterprise dynamic. No business, whether big, medium or small can be started without an adequate amount of finance. Right from the very beginning, i.e. conceiving an idea to business, finance is needed to promote or establish the business, acquire fixed assets, make investigations such as market surveys, etc., develop product, keep men and machine at work, encourages management to make progress and create values. Even an existing concern may require further finance for making improvement or expanding the business. Thus the importance of finance cannot be over-emphasized and the subject of business finance has become utmost important both to the academicians and practicing managers. The academicians find interested in the subject because the subject is still in its developing stage and the practicing managers are interested in the subject because among the most crucial cdecisions of a f
The functions of finance that includes tax, treasury, risk management which will contribute to the achievement of the strategic objectives and goals of the company.
The importance of finance has arisen because of the fact that present day business activities are predominantly carried on company or corporate form of organization. The advent of corporate enterprises resulted into:
The above factors have further increased the importance of corporate finance. As the owners in a corporate enterprise are widely scattered and the management is separated from the ownership, the management has to ensure the maximization of owner’s economic welfare. The success and growth of a firm only by maximization of principles and procedures as lay down by corporation finance.
The knowledge of the discipline of corporation finance is important not only to the practicing managers, but also to others who deal with a corporate enterprise, such as investors, lenders, bankers, creditors, etc., as there is always a scope for the management to manipulate and ‘window dress’ the financial statements.
In the present day capitalistic regime, the size of the business enterprises is increasing resulting into corporate empires empowered with a lot of social and political influence. This makes corporate finance all the more important.
Further, if we refer to corporate finance as the financial management practices by business firms, the importance of financial management can well be described as the importance of corporate finance.
The role of finance has been emerging from a conventional viewpoint to an innovation viewpoint in current competitive business world.
Conventional view – It is operational and risk focused.
Innovation view – It is lateral and forward thinking skills
In ever changing competitive business environment, its vital to re-examine the role of finance function due to the following change drivers:
In today’s competitive world, the roles and responsibilities of finance and accounting functions are facing key knowledge and skills related issues such as:
There are 4 key roles in any organization in present day scenario:
A multinational pharmaceutical group has undergone M&A to derive the synergies in R&D, Sales, Marketing and other support service function in its line of business. The result of mergers made them to drive few changes like.
The finance department has taken initiatives to respond to this situation in a following ways:
The challenge for finance role in any global organization is to revamp the entire working styles to be mapped to meet the desired strategic goals of the business. The finance and accounting professionals will play different key roles like strategy, steward etc., to be a forward and later thinker for the welfare of the organization in future.