What is finance? and also PayPal Fee From economic point of view, we can define finance as the efficient allocation of scare resources within the firm. It involves planning control raising funds and using funds, to be more simple and comprehensive finance is the area of business concerned with gathering and using funds in a most efficient way which should help in obtaining the objective of a firm while remaining whiten the boundaries of predetermined police of organization.

Importance of Finance Finance function has become as increasing by important part of the firm general management. It is the life blood of an organization. The subject matter of finance has under-gone significant change in recent years. Prior to 1950, primary function of finance was obtaining funds, later on attention was given to uses of funds and one of important development of early fifties was a systematic analysis of the internal management of the firm with a focus on flow of funds within the corporate structure.

The Importance of Financial Policy:- Modern business- whether sole proprietorship, partnership, or corporation is formed with the hope then it will make a profit for its owners. To do this, it must endow with inputs of manegment, labour, land and capital, capital represent the financial resources the corporation devote to making a profit. it is the wealth turned over to the corporation by its owners and other to enable management to carry out the purpose of the corporation.Sources of capital Businesses receive their money capital from three board sources- investment by owner, accumulate profit, and debt or loan, these sources are described below.

Investment by owners. Sole proprietorship and partner-ship are usually started when the owner or owners invest cash and other assets in the business. often these investment by owners are the primary resources by which the company is oprete.owners of a limited company invest in the company by buying share when the company is firmed, and sometime through later sales of additional stock, the share held by them represent their ownership in the company.Accumulated profits The second source of capital comes from operation. The accumulated profit provides additional capital to the company. If the company n profitable, its losses will reduce its capital. The owners or director have the choice to pay profit to the shareholders, or they may keep profit in the business by re- investment them in more assets in the hope of earning more profits. Some successful companies re- investment their profit for research and development activities or paying dividend to their share holders, a company’s’ share and its accumulated are usually referred to as equity capital.

Debt or loans The third source of capital is debt i.e. money, good, or services borrowed by the company with the understanding that repayment must be made by fixed future date. Such financing is usually classified by the length that must be paid within one year, long term obligation are debts due in over five years, intermediate debts fall in between. Being due in one to five years.detaials.of this debt financing is given under the heading of sources of financing.

USE OF CAPITAL Once a company has been organized and money has been provide for its operation, managements’ duty is to invest these funds in productive resources. These resources are assets of two main kinds.Fixed assets.Fixed assets are the tools of the business e.g. land building, machines, showroom, fixtures, vehicles etc. they are generally not for sale by the business that owns them butt they are used by the business to produce goods and service. - Creditors Voluntary Liquidation - Caravan Insurance