Business Finance Essentials

Every business organization exhibits three common types of activities: operating activities, investment activities, and financing activities. All these activities absorb and release cash flows and hence possess a financial dimension. If the cash flow into and out of each business activity is not coordinated and directed, there is no assurance the organization will move toward its goal, let alone achieve them. 

Cash balance is the focal point in the firm's financial position. Cash inflows from operating, investing, and financing activities increase the cash reserve. For example, cash received from sales of goods and services is an operating inflow; cash received from selling a piece of equipment represents the reversal of an investing (i.e "divesting") activity; and cash from a bank loan represents inflow from a financing activity. Conversely, cash outflows from operating, investing, and financing activities decrease the cash reserve.For example, payment of cash for employee wages represents an operating cash outflow; purchase of equipment represents an investing outflow; and repayment of a bank loan represents a financing outflow. Someone in an organization has to monitor, direct, and evaluate the flow of cash into and out of each basic organizational activity to make sure organizational goals are served effectively. This is the essence of financial management in the organization.

This course focuses primarily on financial processes and, in particular , the planning and control of organizational cash flows, stock and inventory control,  creditors and debtors control. It examines the importance of proper working capital management to the value of the firm and offers principles to guide working capital  decisions.