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What is financing?

The theory of financing is very important in the monetary book.  Every economical work of people especially the materials that need most to operate a business is money. Worldly, no production work is possible to execute without money. Finance is the lifeblood of any kind of organization. It is important to learn everything about finance.

Financing means collecting funds to operate any kind of business organization. In a broader sense, financing is the function of proper management of collecting and accumulating money to operate a business.

Finance has consisted of three interrelated fields. Such as –

  1. Financial markets
  2. Investment
  3. Managerial finance

In short, the total functions of collecting money, distribution of money, investment of money, planning for proper use of money, distribution of profit from invested money is known as financing.

The function of financing:

The proper use of money is needed to implement any kind of entrepreneurship or to increase The mobility of people, family, society, organization, and government. The function of financing are described below:

  1. Plan for collecting money:

The first and major functions of financing are planning for collecting money.

  1. Collecting money from various sources:

It is another function is to collecting money from various sources. Before collecting money, it is important to make comparisons among various sources.  Besides, it is wise to select profitable sources to collect money.

  1. Collecting finance in easy condition :

Collecting money is the function of financing as well as expending money or investing in the profitable sector is another function of financing so that it is possible to get higher profit

  1. Policy for expending money :

It would be foolish if you don’t follow the policy for expending money

  1. Use of fund:

After collecting money, it is wise to decide the less risky sector for investment. Besides, by reducing production cost, produce a better quality of products, and ensure higher profit.

  1. Diagnosis of the result :

The last function is the diagnosis of the result. How much profit will be earned  from an investment, present conditioned of finance, how will be deal when the loss occurred

Classification of finance:

There are two types of finance. Such as –

  1. Public finance:

The finance that is provided by the government is known as public finance. The government can collect money from various sources of domestic and abroad. Generally, the government can do many things for the welfare of the people in the country. For example – the welfare of the society, economic development, infrastructure development, domestic development, ensure education to all, remove poverty, and so on.

  1. Private finance :

The finance that is provided by the person or organization is known as private finance. All finance that is provided by the person or organization except the government is known as private finance. Private finance has many forms. Like –

  • Personal finance
  • Business finance
  • Non-business finance
  • international finance

 

 

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