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What You Should Know on Finance

Finance can be defined as a branch of economics that studies the management of money and other assets. If you prefer, it can also be a general term which encompasses the entire subject of managing and supplying money in the business and private sector. A company that has funds to manage will, more than likely, employ the services of a finance manager who is likely an expert in the field of economics.

Managing this involves dealing with the optimization and allocation of funds to various areas either by borrowing or by using those available from internal resources. The function of the finance manager is to Optimize or enable the fund to be made available with as little cost to the company but provide for a profit to be made in this process. The lives of almost everyone on this planet revolve around finance and when poor management occurs, the effects are seen globally with reductions in production and sales which obviously feed world markets. The risks for a company are high if poor decisions are made and this is the reason finance managers do not last very long in this field.

The well known management expert Lee Iacocca said of finance managers that they only see the cost of the investment and not the possible return. The big difference between finance managers and sales managers is the direction they are facing; a sales manager is looking forward, towards the future. For most small business owners there is not a clear distinction between personal and business which often leads to the funds being used in areas that are not part of the arrangement. When money is lent under these circumstances, lenders feel quite aggrieved as they have lost control of where the money is being invested.

This may cause some concern amongst small business owners but they should train themselves to be more focused on their business which should in turn create a better frame of mind for the future. Small businesses are not however, restricted to using external finance companies because other sources do exist including their bank, friends and other types of private lender.

Obviously the more finance that is provided by outside sources the more it ignites the profitability of the lender. Banks have always been known as institutions that prefer to lend money to those that least need it which is why if you are already wealthy and require a loan it is often arranged at a preferential rate of interest.

By: Zindy Maseko

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