IBS on Financial Report: Functions of Finance Management and Sources of Finance

This report explains the concepts of finance and financial management, with a focus on the functions of financial management in an organization. It also covers the different sources of finance available to businesses, including short-term and long-term sources. The report concludes with a summary of the importance of financial management and sources of finance in maximizing shareholder wealth.

IBS on Financial
Report

Contents
INTRODUCTION ..........................................................................................................................1
MAIN BODY...................................................................................................................................1
1.What is finance and finance management................................................................................1
2.Functions of a finance management.........................................................................................1
3.Explain the different sources of finance. .................................................................................2
CONCLUSION ...............................................................................................................................4
REFERENCES................................................................................................................................4

INTRODUCTION
Finance is referred as the study of money, currency and subject of capital asset utilisation
in the business. Financial management whereas refers to the management of finance in an
organisation for utilising and maximising the wealth of shareholders and investors (Delfani and
Ibrahim, 2021). In this report, the concept of finance and financial management are explained
and differentiated. This report puts a higher focus on the functions relating to the management
of finance in an organisation. The sources of finances that are available with the business have
also been taken into account and justified with suitable explanations.
MAIN BODY
1.What is finance and finance management.
Finance: Finance as a subject is defined to be the study of money, banking, investments,
assets. Finance involves the activities undertaken by an enterprise to bring in capital with sale of
stocks, bonds, or other promissory notes. It is the discipline of currency, leverage, debt and the
utilisation of capital assets of any organization. It is also related with the process of acquiring
funds and represents the utilisation and creation of money management.
Finance management: It is defined to be those activities which are performed with the
objective of improving and maximising the shareholders wealth in an organisation while also
utilising the principles of time value of money, diversification and the investment generations. It
involves application of management principles to the financial resources to increase the worth of
business assets.
2.Functions of a finance management.
Financial management plays a very crucial role in an organisation. It deals with the procurement
and effective utilisation of the resources in an organisation. An effective financial management
enables an organisation to aim for profit maximisation and sound financial health for the
business. The functions in financial management are as follows: Financial planning and forecasting: Financial management assists an organisation in
preparing for its future plans regarding the business finances termed as financial panning.
This is done by the finance managers of the organisation taking various factors in
consideration (Fauzi, Hasim and Mustafa, 2018). These planning are based on various
forecasts that the business does to prepare for an effective set of plans. These are based
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on the sales forecasts, pro forma statements, asset necessities, economic postulates and
mode of financing investments. Financial planning then helps the organisation in
identifying the business capital requirements, determining the capital structure of the
enterprise and freaming the necessary and suitable financial policies. Procurement of funds: Financial management enables an organisation to procure the
required funds for running the business. It involves selecting from the wide variety of
sources available to acquire the capital for business. The source to choose from the
varieties available depends largely upon the need and time for which the financing is
needed by the organisation (Gress, 2020). Cash management: One of the primary functions of financial management associates
with the management of cash in the organisation. It depends upon the financial managers
of the business to decide where and in what capacity the cash will be utilised in the
business. It can either be used to meet the liabilities, pay back the business debtors, to
make the due bill payments or invest in a securities for making the maximum utilisation
of the cash owned.
 Investment of Funds: Financial management enables an organisation to make the
maximum profit out of the funds that are available with the business by investing them in
the most beneficial and suitable securities. The financial managers of the business check
upon the risk which is related with all the different investment options available with the
business and also calculates for the return on investment (ROI) with each option
available. This investment decisions of any organisation is based on three principles :
profitability, safety and the liquidity.
3.Explain the different sources of finance.
Sources of finance refer to the various means that are available with a business organisation for
the purpose of raising funds for carrying out and completing the activities of the organisation.
The businesses attain these kinds of monetary funding through various sources available in the
market. The sources of finance on the basis of time period can be distinguished in two different
types, namely: Long term sources and short term sources.
1. Short Term Finances: These are the sources which are utilised by the businesses to raise
the amount of funds for a short period of time which is less than a period of 12 months.
The amount which is collected through the short term sources of finance is due to be
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repaid at the end of the tenure of 12 months. These are used to fulfil the short term fund
requirements of the organisation (Tashkandi, 2023). Commercial paper: It is an unsecured promissory note which is issued by high reputed
organisations to acquire short term funding. The maturity period for these can range from
91 days to 180 days period. Bank Overdraft: It is a credit facility provided by various banks to its members and
account holders for a short period. This facility provides the customers with the chance to
withdraw a certain amount of money from their bank accounts upon the limit set by the
bank. The customers are required to pay the due interest over the amount withdrawn from
the bank.
2. Long Term Finance: These are the sources of finance that are used by the business
organisations to raise the funds for a period of more than one year. The amount collected
through long term sources is not needed to be repaid within the period of 12 months and
can be paid back over the course of two years. These are utilised to accomplish the long
term fund necessities of the enterprise. Equity shares: A capital market instrument which is issued by companies for a period of
more than one year. These corresponds to the stand for capital ownership in the company.
These are the real owners of business and the holders of equity shares have their voting
rights assigned in the company.
 Retained earnings: this refers to the reinvestment of the profit that is earned by the
company back in the company with the aim of expansion, growth and development. This
is done by the companies as instead of distributing the entire profits of the business to the
shareholders, retain some amount of the profit and re-invest it in the business (Ismail,
2019).
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CONCLUSION
From the above report, it can be concluded that finance and finance management are two
of the most essential concepts of the business. Financial management as concept helps the
business managers in an organisation to assess and determine the sources which assist the
business to generate cash and maximise the shareholders wealth. The various functions of
financial management shows its importance in an organisation. The report also concludes upon
the explanations of sources of finance and the types of sources such as bank overdrafts, equity
shares that are available to the business organisation for sourcing their fund requirements.
REFERENCES
Books and Journals:
Delfani, M. and Ibrahim, R., 2021. Essential Features of Design Process for Professionals
Participating in IBS Projects in Malaysia. In Resilient and Responsible Smart Cities (pp.
121-129). Springer, Cham.
Fauzi, M.A., Hasim, S. and Mustafa, M.A., 2018. Supply Chain Management (SCM) on
Industrialised Building System (IBS) in Construction Industry: Supplier Perspective.
In Regional conference on science, Technology and Social Sciences (RCSTSS
2016) (pp. 445-454). Springer, Singapore.
Gress, D.R., 2020. Examining Korea's international science and business belt project through an
evolutionary economic geography lens. GeoJournal, 85(5), pp.1241-1255.
Ismail, Z.A., 2019. Optimising the safety of road transport workers on IBS building construction
projects: a review. Social Responsibility Journal.
Tashkandi, A.A., 2023. Analyzing Sharia Supervision Effects on the Performance of Islamic
Banks: Evidence from the GCC Countries. In International Conference on Business and
Technology (pp. 924-935). Springer, Cham.
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